Crexendo, Inc.'s (NASDAQ:CXDO) 30% Jump Shows Its Popularity With Investors

Despite an already strong run, Crexendo, Inc. (NASDAQ:CXDO) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 168% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that Crexendo's price-to-sales (or "P/S") ratio of 2.4x right now seems quite "middle-of-the-road" compared to the IT industry in the United States, where the median P/S ratio is around 2.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Crexendo

What Does Crexendo's Recent Performance Look Like?

Crexendo certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Crexendo will help you uncover what's on the horizon.

How Is Crexendo's Revenue Growth Trending?

Crexendo's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. Pleasingly, revenue has also lifted 204% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.2%, which is not materially different.

In light of this, it's understandable that Crexendo's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Crexendo appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A Crexendo's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the IT industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Before you settle on your opinion, we've discovered 2 warning signs for Crexendo that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.