MindWalk Holdings Corp.'s (NASDAQ:HYFT) P/S Is Still On The Mark Following 38% Share Price Bounce
MindWalk Holdings Corp. (NASDAQ:HYFT) shareholders have had their patience rewarded with a 38% share price jump in the last month. This latest share price bounce rounds out a remarkable 391% gain over the last twelve months.
Since its price has surged higher, given around half the companies in the United States' Life Sciences industry have price-to-sales ratios (or "P/S") below 3.8x, you may consider MindWalk Holdings as a stock to avoid entirely with its 6.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
See our latest analysis for MindWalk Holdings
How MindWalk Holdings Has Been Performing
MindWalk Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on MindWalk Holdings.Is There Enough Revenue Growth Forecasted For MindWalk Holdings?
The only time you'd be truly comfortable seeing a P/S as steep as MindWalk Holdings' is when the company's growth is on track to outshine the industry decidedly.
Retrospectively, the last year delivered an exceptional 49% gain to the company's top line. Pleasingly, revenue has also lifted 34% in aggregate from three years ago, thanks to the last 12 months of growth. 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 10% per annum during the coming three years according to the two analysts following the company. With the industry only predicted to deliver 6.5% per annum, the company is positioned for a stronger revenue result.
With this information, we can see why MindWalk Holdings is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
What We Can Learn From MindWalk Holdings' P/S?
Shares in MindWalk Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that MindWalk Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Life Sciences industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.
You should always think about risks. Case in point, we've spotted 2 warning signs for MindWalk Holdings you should be aware of, and 1 of them makes us a bit uncomfortable.
If you're unsure about the strength of MindWalk Holdings' 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.