CPI Europe AG (VIE:CPI) Doing What It Can To Lift Shares

With a price-to-sales (or "P/S") ratio of 2.9x CPI Europe AG (VIE:CPI) may be sending bullish signals at the moment, given that almost half of all the Real Estate companies in Austria have P/S ratios greater than 4.7x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for CPI Europe

What Does CPI Europe's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, CPI Europe has been doing quite well of late. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. Those who are bullish on CPI Europe will be hoping that this isn't the case and the company continues to beat out the industry.

Keen to find out how analysts think CPI Europe's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For CPI Europe?

The only time you'd be truly comfortable seeing a P/S as low as CPI Europe's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. The latest three year period has also seen an excellent 57% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.01% as estimated by the sole analyst watching the company. Meanwhile, the industry is forecast to moderate by 7.7%, which indicates the company should perform better regardless.

With this information, it's perhaps strange but not a major surprise that CPI Europe is trading at a lower P/S in comparison. Even though the company may outperform the industry, shrinking revenues are unlikely to lead to a stable P/S long-term. There's still potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does CPI Europe's P/S Mean For Investors?

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.

Our examination of CPI Europe's analyst forecasts revealed that its P/S ratio is lower than expected, given it's set to outperform the broader industry. When we see this a revenue outlook that is advantageous when compared to competitors, we assume potential risks are what might be placing significant pressure on the P/S ratio. Perhaps there is some hesitation about the company's ability to keep resisting the broader industry turmoil. So, given the low P/S, risk of a price drop looks to be subdued, but investors seem to think future revenue could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for CPI Europe that you should be aware of.

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.