Those holding Implanet S.A. (EPA:ALIMP) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last month tops off a massive increase of 108% in the last year.
Even after such a large jump in price, there still wouldn't be many who think Implanet's price-to-sales (or "P/S") ratio of 2.8x is worth a mention when the median P/S in France's Medical Equipment industry is similar at about 2.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for Implanet
Recent times have been quite advantageous for Implanet as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Implanet's earnings, revenue and cash flow.The only time you'd be comfortable seeing a P/S like Implanet's is when the company's growth is tracking the industry closely.
If we review the last year of revenue growth, the company posted a terrific increase of 52%. The latest three year period has also seen an excellent 45% 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.
Comparing that to the industry, which is only predicted to deliver 6.5% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
In light of this, it's curious that Implanet's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.
Implanet's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 our surprise, Implanet revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Plus, you should also learn about these 5 warning signs we've spotted with Implanet (including 4 which don't sit too well with us).
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.