Telos Corporation (NASDAQ:TLS) Stock Rockets 43% But Many Are Still Ignoring The Company

Explore Telos's Fair Values from the Community and select yours

Telos Corporation (NASDAQ:TLS) shareholders have had their patience rewarded with a 43% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 47% in the last year.

Even after such a large jump in price, Telos may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.6x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.8x and even P/S higher than 11x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Telos

What Does Telos' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Telos' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Telos?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 22%. As a result, revenue from three years ago have also fallen 54% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 50% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 20% growth forecast for the broader industry.

In light of this, it's peculiar that Telos' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Telos' P/S Mean For Investors?

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

To us, it seems Telos currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Telos (at least 1 which is potentially serious), and understanding them should be part of your investment process.

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