 Further Upside For CloudCoCo Group plc (LON:CLCO) Shares Could Introduce Price Risks After 220% Bounce
CloudCoCo Group plc (LON:CLCO) shareholders would be excited to see that the share price has had a great month, posting a 220% gain and recovering from prior weakness. But the last month did very little to improve the 58% share price decline over the last year.
Even after such a large jump in price, CloudCoCo Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the IT industry in the United Kingdom have P/S ratios greater than 1.5x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
How Has CloudCoCo Group Performed Recently?
CloudCoCo Group has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.
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 CloudCoCo Group's earnings, revenue and cash flow.
Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, CloudCoCo Group would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. The latest three year period has also seen an excellent 255% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.
Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 8.1% shows it's noticeably more attractive.
With this information, we find it odd that CloudCoCo Group is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.
The Final Word
The latest share price surge wasn't enough to lift CloudCoCo Group's P/S close to the industry median. 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're very surprised to see CloudCoCo Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price. |
I pretty much called it on the last line of my post of 30 April. |
Still well off my highs Dud, but got a decent lump sum back I never expected and had written off.Removing from watchlist for now. |
Is the share price drop in the room with us Dan? |
last chance to sell. you can not imagine how the share price level will be soon when everyone realise is not going higher and wants to get out with profit before close. watch share price level after 2pm. |
Last of mine sold.It's been a blast people. |
Seems I can sell my whole holding currently, so seems someone is keen. |
TBF, it could go to a penny now and not be overvalued |
100k printed at 0.28p. |
Yes, zero arguments from me either. |
No arguments there Blakesmith. This is a recoup your investment back situation. |
Still not worth buying |
Early online bid showing a circa min 40% markup. |
So CLCO becomes a "Scan Computers" style online reseller to consumers and business, whilst the consultancy and support side of the business goes to pastures new.Growth opportunities aside (and the retained business was one of the bright spots in 2023/24) will be interesting to see what the future holds here. Market cap wise. We have what? An enterprise value of a few M of intangibles and nearly a million in the bank, plus the sale of connect to come. All at a mcap of just over a million. Will be interesting to see where this goes. |
A possibility we haven't lost all our investment. We'll see. |
Well there is a lot to digest! Seems they found a solution. |
It's a going concern for another 18 months yet, or until MXC decide not to support the company. |
I abstained from mentioning that because if they've got this far without saying they're no longer a 'going concern' then they can most likely wait another 4 weeks. |
cordwainer, at this rate will they still be trading in 4 weeks. The share price just keeps falling, every sell keeps reducing the price.... |
Trading update due in 4 weeks. |
Of course, this is all conjecture and opinion without knowing the ins and outs of the board room. There could be "arms length" challenges to all this as well. |
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