Revenues Tell The Story For Adore Beauty Group Limited (ASX:ABY)

There wouldn't be many who think Adore Beauty Group Limited's (ASX:ABY) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Specialty Retail industry in Australia is similar at about 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Adore Beauty Group

What Does Adore Beauty Group's P/S Mean For Shareholders?

Adore Beauty Group could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Adore Beauty Group will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

Adore Beauty Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 3.4% gain to the company's revenues. The latest three year period has also seen a 13% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 10% over the next year. That's shaping up to be similar to the 9.3% growth forecast for the broader industry.

With this in mind, it makes sense that Adore Beauty Group's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Adore Beauty Group's P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at Adore Beauty Group's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

It is also worth noting that we have found 1 warning sign for Adore Beauty Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Adore Beauty Group, 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.