Gorilla Technology Group Inc. (NASDAQ:GRRR) stock price rose 36%, but its business outlook also needs improvement

Gorilla Technology Group Inc. (NASDAQ:GRRR) shares have continued their recent momentum with a gain of 36% in the last month alone. While recent buyers may be laughing, long-term holders may not be so pleased, as the recent rise only brings the stock back to where it started at a year ago.

Even after such a big jump in price, Gorilla Technology Group could still represent a good buying opportunity with its price-to-sales (or “P/S”) ratio of 0.9 right now, considering almost half of all companies in the industry Software industry in the United States has P/S ratios greater than 5.6x and even P/S ratios greater than 14x are not uncommon. However, the P/S may be quite low for a reason and further research is needed to determine whether it is justified.

Check out our latest analysis for Gorilla Technology Group

What is Gorilla Technology Group’s recent performance?

Gorilla Technology Group is doing relatively well, with revenue growth that has outpaced most other companies recently. One possibility is that the P/E ratio is low because investors believe this strong sales performance may be less impressive in the future. If the company manages to stay the course, investors should be rewarded with a share price that matches its sales figures.

Want a complete overview of analyst estimates for the company? Then ours free The Gorilla Technology Group report will help you figure out what’s on the horizon.

Do the sales forecasts match the low price-to-performance ratio?

Gorilla Technology Group’s P/E ratio would be typical of a company that is expected to deliver very weak growth or even declining sales and, more importantly, perform significantly worse than the industry.

If we review the last year of revenue growth, we see that the company’s revenue has grown exponentially. Over the last three-year period, total revenue also increased by an outstanding 73% thanks to incredible short-term performance. Accordingly, shareholders would have welcomed these medium-term sales growth rates.

Looking ahead, revenue is expected to decline, falling 0.2% next year, according to the two analysts covering the company. That’s not great considering the rest of the industry will grow 27%.

Given this information, we’re not surprised to see Gorilla Technology Group trading at a lower P/E than the industry. However, shrinking revenues are unlikely to result in a stable price-to-earnings ratio in the longer term. Even maintaining these prices could be difficult as the weak outlook weighs on stocks.

What does Gorilla Technology Group’s P/E ratio mean for investors?

Gorilla Technology Group’s recent share price jump still results in its price-to-earnings (P/E) ratio not being at the same level as the industry average. We would say that the price-to-sales ratio is not primarily a valuation tool, but rather is used to measure current investor sentiment and future expectations.

It can be clearly seen that Gorilla Technology Group is maintaining its low price-to-earnings ratio as expected due to the weak forecast for declining sales. At this point, investors believe the potential for revenue improvement is not great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to act as a barrier to share price near these levels.

It’s also worth noting what we found 5 warning signs for Gorilla Technology Group (3 make us uncomfortable!) that you need to consider.

If yes uncertain about the strength of Gorilla Technology Group’s businessExplore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.