Even With A 26% Surge, Cautious Investors Are Not Rewarding Cantaloupe, Inc.'s (NASDAQ:CTLP) Performance Completely

The Cantaloupe, Inc. (NASDAQ:CTLP) share price has done very well over the last month, posting an excellent gain of 26%. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

Although its price has surged higher, it's still not a stretch to say that Cantaloupe's price-to-sales (or "P/S") ratio of 2.2x right now seems quite "middle-of-the-road" compared to the Diversified Financial industry in the United States, where the median P/S ratio is around 2.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Cantaloupe

How Has Cantaloupe Performed Recently?

Recent times haven't been great for Cantaloupe as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Cantaloupe's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. The latest three year period has also seen an excellent 61% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the six analysts following the company. With the industry only predicted to deliver 4.2%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Cantaloupe's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Cantaloupe's P/S Mean For Investors?

Its shares have lifted substantially and now Cantaloupe's P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, Cantaloupe's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Cantaloupe with six simple checks.

If you're unsure about the strength of Cantaloupe'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.