Improved Revenues Required Before NextPlat Corp (NASDAQ:NXPL) Stock's 25% Jump Looks Justified

Despite an already strong run, NextPlat Corp (NASDAQ:NXPL) shares have been powering on, with a gain of 25% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 26% in the last twelve months.

Although its price has surged higher, NextPlat's price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Telecom industry in the United States, where around half of the companies have P/S ratios above 1.3x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for NextPlat

How NextPlat Has Been Performing

Revenue has risen firmly for NextPlat recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on NextPlat will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on NextPlat will help you shine a light on its historical performance.

How Is NextPlat's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as NextPlat's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 110% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why NextPlat's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

The latest share price surge wasn't enough to lift NextPlat's P/S close to the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

In line with expectations, NextPlat maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware NextPlat is showing 3 warning signs in our investment analysis, and 2 of those are a bit concerning.

If you're unsure about the strength of NextPlat's 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.