Revenues Tell The Story For Perma-Fix Environmental Services, Inc. (NASDAQ:PESI) As Its Stock Soars 26%

Despite an already strong run, Perma-Fix Environmental Services, Inc. (NASDAQ:PESI) shares have been powering on, with a gain of 26% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 19% is also fairly reasonable.

After such a large jump in price, when almost half of the companies in the United States' Commercial Services industry have price-to-sales ratios (or "P/S") below 1.5x, you may consider Perma-Fix Environmental Services as a stock probably not worth researching with its 2.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Perma-Fix Environmental Services

What Does Perma-Fix Environmental Services' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Perma-Fix Environmental Services' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Keen to find out how analysts think Perma-Fix Environmental Services' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Perma-Fix Environmental Services?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Perma-Fix Environmental Services' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. As a result, revenue from three years ago have also fallen 26% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 15% as estimated by the sole analyst watching the company. That's shaping up to be materially higher than the 7.2% growth forecast for the broader industry.

In light of this, it's understandable that Perma-Fix Environmental Services' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Perma-Fix Environmental Services' P/S?

Perma-Fix Environmental Services' P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Perma-Fix Environmental Services shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Perma-Fix Environmental Services that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.