Interlink Electronics, Inc.'s (NASDAQ:LINK) Popularity With Investors Is Clear
When close to half the companies in the Electronic industry in the United States have price-to-sales ratios (or "P/S") below 1.6x, you may consider Interlink Electronics, Inc. (NASDAQ:LINK) as a stock to avoid entirely with its 5.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
View our latest analysis for Interlink Electronics
How Has Interlink Electronics Performed Recently?
With revenue growth that's superior to most other companies of late, Interlink Electronics has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Keen to find out how analysts think Interlink Electronics' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Revenue Growth Forecasted For Interlink Electronics?
There's an inherent assumption that a company should far outperform the industry for P/S ratios like Interlink Electronics' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 37% gain to the company's top line. The latest three year period has also seen an excellent 49% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 36% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.
In light of this, it's understandable that Interlink Electronics' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
What Does Interlink Electronics' P/S Mean For Investors?
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.
Our look into Interlink Electronics shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
Before you take the next step, you should know about the 4 warning signs for Interlink Electronics (1 shouldn't be ignored!) that we have uncovered.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
