After Leaping 28% Motorcar Parts of America, Inc. (NASDAQ:MPAA) Shares Are Not Flying Under The Radar

Motorcar Parts of America, Inc. (NASDAQ:MPAA) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. The last month tops off a massive increase of 135% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Motorcar Parts of America's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in the United States' Auto Components industry is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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See our latest analysis for Motorcar Parts of America

What Does Motorcar Parts of America's P/S Mean For Shareholders?

Motorcar Parts of America certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. Those who are bullish on Motorcar Parts of America will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Motorcar Parts of America.

Is There Some Revenue Growth Forecasted For Motorcar Parts of America?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Motorcar Parts of America's to be considered reasonable.

Retrospectively, the last year delivered a decent 4.3% gain to the company's revenues. Revenue has also lifted 15% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 4.7% over the next year. With the industry predicted to deliver 4.9% growth , the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Motorcar Parts of America's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Motorcar Parts of America's P/S

Its shares have lifted substantially and now Motorcar Parts of America's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at Motorcar Parts of America's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - Motorcar Parts of America has 1 warning sign we think you should be aware of.

If you're unsure about the strength of Motorcar Parts of America's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.