Lenzing Aktiengesellschaft's (VIE:LNZ) Share Price Is Matching Sentiment Around Its Revenues

Lenzing Aktiengesellschaft's (VIE:LNZ) price-to-sales (or "P/S") ratio of 0.5x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Chemicals industry in Austria have P/S ratios greater than 1.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Lenzing

How Has Lenzing Performed Recently?

Recent times have been more advantageous for Lenzing as its revenue hasn't fallen as much as the rest of the industry. It might be that many expect the comparatively superior revenue performance to degrade substantially, which has repressed the P/S. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. In saying that, existing shareholders probably aren't pessimistic about the share price if the company's revenue continues outplaying the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Lenzing.

How Is Lenzing's Revenue Growth Trending?

In order to justify its P/S ratio, Lenzing would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 54% in aggregate from three years ago, notwithstanding the last 12 months. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Turning to the outlook, the next three years should generate growth of 3.9% per year as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 88% per year, which is noticeably more attractive.

With this information, we can see why Lenzing is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Lenzing's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Lenzing's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Lenzing that you should be aware of.

If these risks are making you reconsider your opinion on Lenzing, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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