Investors Holding Back On CPI Europe AG (VIE:CPI)

You may think that with a price-to-sales (or "P/S") ratio of 3.1x CPI Europe AG (VIE:CPI) is definitely a stock worth checking out, seeing as almost half of all the Real Estate companies in Austria have P/S ratios greater than 6.4x and even P/S above 10x aren't out of the ordinary. 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

View our latest analysis for CPI Europe

How CPI Europe Has Been Performing

CPI Europe has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is CPI Europe's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 9.7% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 53% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to shrink 2.3% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

In light of this, it's quite peculiar that CPI Europe's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On CPI Europe's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Looking at the figures, it's surprising to see CPI Europe currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. We think potential risks might be placing significant pressure on the P/S ratio and share price. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

It is also worth noting that we have found 2 warning signs for CPI Europe that you need to take into consideration.

If you're unsure about the strength of CPI Europe's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.