Even With A 27% Surge, Cautious Investors Are Not Rewarding Ispire Technology Inc.'s (NASDAQ:ISPR) Performance Completely

Ispire Technology Inc. (NASDAQ:ISPR) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 56% share price drop in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that Ispire Technology's price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Tobacco industry in the United States, where the median P/S ratio is around 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Ispire Technology

What Does Ispire Technology's P/S Mean For Shareholders?

Ispire Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. 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 Ispire Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Ispire Technology?

The only time you'd be comfortable seeing a P/S like Ispire Technology's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.7%. Even so, admirably revenue has lifted 64% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to remain buoyant, climbing by 27% during the coming year according to the lone analyst following the company. With the rest of the industry predicted to shrink by 0.3%, that would be a fantastic result.

With this in mind, we find it intriguing that Ispire Technology's P/S trades in-line with its industry peers. It looks like most investors aren't convinced the company can achieve positive future growth in the face of a shrinking broader industry.

The Bottom Line On Ispire Technology's P/S

Ispire Technology appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 examination of Ispire Technology's analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't resulting in the company trading at a higher P/S, as per our expectations. We assume that investors are attributing some risk to the company's future revenues, keeping it from trading at a higher P/S. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Ispire Technology (1 is concerning!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.