Cobram Estate Olives Limited's (ASX:CBO) P/S Is Still On The Mark Following 27% Share Price Bounce

Cobram Estate Olives Limited (ASX:CBO) shares have continued their recent momentum with a 27% gain in the last month alone. Looking further back, the 20% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, given around half the companies in Australia's Food industry have price-to-sales ratios (or "P/S") below 1x, you may consider Cobram Estate Olives as a stock to avoid entirely with its 4.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Cobram Estate Olives

What Does Cobram Estate Olives' P/S Mean For Shareholders?

Cobram Estate Olives certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Cobram Estate Olives' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Cobram Estate Olives' is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 21% last year. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 20% each year over the next three years. That's shaping up to be materially higher than the 5.9% per year growth forecast for the broader industry.

In light of this, it's understandable that Cobram Estate Olives' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Shares in Cobram Estate Olives have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 Cobram Estate Olives' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about this 1 warning sign we've spotted with Cobram Estate Olives.

If these risks are making you reconsider your opinion on Cobram Estate Olives, 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.