Further Upside For Priority Technology Holdings, Inc. (NASDAQ:PRTH) Shares Could Introduce Price Risks After 27% Bounce

Despite an already strong run, Priority Technology Holdings, Inc. (NASDAQ:PRTH) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 129% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Priority Technology Holdings may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.7x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Priority Technology Holdings

What Does Priority Technology Holdings' Recent Performance Look Like?

Recent revenue growth for Priority Technology Holdings has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on Priority Technology Holdings will be hoping that this isn't the case.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Priority Technology Holdings.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as depressed as Priority Technology Holdings' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 79% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 4.5% growth forecast for the broader industry.

With this information, we find it odd that Priority Technology Holdings is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Priority Technology Holdings' P/S

Priority Technology Holdings' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

Priority Technology Holdings' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Priority Technology Holdings (of which 1 is a bit unpleasant!) you should know about.

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.