Market Participants Recognise Byrna Technologies Inc.'s (NASDAQ:BYRN) Revenues Pushing Shares 37% Higher

Simply Wall St · 09/01 12:14

Byrna Technologies Inc. (NASDAQ:BYRN) shareholders would be excited to see that the share price has had a great month, posting a 37% gain and recovering from prior weakness. The last month tops off a massive increase of 218% in the last year.

After such a large jump in price, you could be forgiven for thinking Byrna Technologies is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.4x, considering almost half the companies in the United States' Aerospace & Defense industry have P/S ratios below 2.5x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Byrna Technologies

ps-multiple-vs-industry
NasdaqCM:BYRN Price to Sales Ratio vs Industry September 1st 2024

What Does Byrna Technologies' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Byrna Technologies has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. 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 Byrna 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 outperform the industry for P/S ratios like Byrna Technologies' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 23% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 59% in total over the last three years. 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 37% during the coming year according to the three analysts following the company. With the industry only predicted to deliver 13%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Byrna Technologies' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Byrna Technologies shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Byrna Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Aerospace & Defense industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Byrna Technologies has 1 warning sign we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.