Enprise Group Limited (NZSE:ENS) shares have continued their recent momentum with a 34% gain in the last month alone. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, considering about half the companies operating in New Zealand's Software industry have price-to-sales ratios (or "P/S") above 4.5x, you may still consider Enprise Group as an great investment opportunity with its 1x 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 limited.

View our latest analysis for Enprise Group

What Does Enprise Group's Recent Performance Look Like?

The recent revenue growth at Enprise Group would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. Those who are bullish on Enprise Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Enprise Group will help you shine a light on its historical performance.

How Is Enprise Group's Revenue Growth Trending?

In order to justify its P/S ratio, Enprise Group would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.8%. This was backed up an excellent period prior to see revenue up by 36% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 20% shows it's noticeably less attractive.

In light of this, it's understandable that Enprise Group's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Shares in Enprise Group have risen appreciably however, its P/S is still subdued. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Enprise Group revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Having said that, be aware Enprise Group is showing 3 warning signs in our investment analysis, and 2 of those can't be ignored.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.