Lobo Technologies Ltd. (NASDAQ:LOBO) Soars 27% But It's A Story Of Risk Vs Reward
Despite an already strong run, Lobo Technologies Ltd. (NASDAQ:LOBO) shares have been powering on, with a gain of 27% in the last thirty days. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 61% share price drop in the last twelve months.
Although its price has surged higher, there still wouldn't be many who think Lobo Technologies' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in the United States' Auto industry is similar at about 0.9x. 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 Lobo Technologies
How Lobo Technologies Has Been Performing
Revenue has risen firmly for Lobo Technologies recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Lobo Technologies will help you shine a light on its historical performance.Is There Some Revenue Growth Forecasted For Lobo Technologies?
Lobo Technologies' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
If we review the last year of revenue growth, the company posted a worthy increase of 8.6%. Pleasingly, revenue has also lifted 87% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.
When compared to the industry's one-year growth forecast of 10%, the most recent medium-term revenue trajectory is noticeably more alluring
With this information, we find it interesting that Lobo Technologies is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.
The Final Word
Its shares have lifted substantially and now Lobo Technologies' P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We didn't quite envision Lobo Technologies' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.
It is also worth noting that we have found 4 warning signs for Lobo Technologies (3 are significant!) that you need to take into consideration.
If these risks are making you reconsider your opinion on Lobo Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.