LightPath Technologies, Inc.'s (NASDAQ:LPTH) 62% Jump Shows Its Popularity With Investors

Despite an already strong run, LightPath Technologies, Inc. (NASDAQ:LPTH) shares have been powering on, with a gain of 62% in the last thirty days. This latest share price bounce rounds out a remarkable 471% gain over the last twelve months.

Since its price has surged higher, given around half the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2.8x, you may consider LightPath Technologies as a stock to avoid entirely with its 10.7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for LightPath Technologies

What Does LightPath Technologies' P/S Mean For Shareholders?

Recent revenue growth for LightPath Technologies has been in line with the industry. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like LightPath Technologies' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 59% as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 14% growth forecast for the broader industry.

In light of this, it's understandable that LightPath Technologies' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On LightPath Technologies' P/S

The strong share price surge has lead to LightPath Technologies' P/S soaring as well. 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.

We've established that LightPath Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for LightPath Technologies that you should be aware of.

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.