A Piece Of The Puzzle Missing From Rekor Systems, Inc.'s (NASDAQ:REKR) 36% Share Price Climb

Rekor Systems, Inc. (NASDAQ:REKR) shares have continued their recent momentum with a 36% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 7.6% over the last year.

Although its price has surged higher, Rekor Systems may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.7x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 6.1x and even P/S higher than 13x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Rekor Systems

How Rekor Systems Has Been Performing

With revenue growth that's superior to most other companies of late, Rekor Systems has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Rekor Systems would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 44% gain to the company's top line. The latest three year period has also seen an excellent 214% overall rise in revenue, aided by its short-term performance. 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 36% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 17% growth forecast for the broader industry.

With this information, we find it odd that Rekor Systems 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.

What We Can Learn From Rekor Systems' P/S?

Rekor Systems' stock price has surged recently, but its but its P/S still remains modest. 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.

Rekor Systems' 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. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 2 warning signs for Rekor Systems (1 is potentially serious!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Rekor Systems, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.