Cettire Limited's (ASX:CTT) Shares Leap 25% Yet They're Still Not Telling The Full Story

Those holding Cettire Limited (ASX:CTT) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 75% share price decline over the last year.

In spite of the firm bounce in price, given about half the companies operating in Australia's Specialty Retail industry have price-to-sales ratios (or "P/S") above 0.7x, you may still consider Cettire as an attractive investment with its 0.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for Cettire

How Has Cettire Performed Recently?

While the industry has experienced revenue growth lately, Cettire's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Cettire's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Cettire's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period has seen an excellent 254% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Turning to the outlook, the next three years should generate growth of 8.4% per year as estimated by the two analysts watching the company. With the industry predicted to deliver 7.1% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that Cettire is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

Cettire's stock price has surged recently, but its but its P/S still remains modest. 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.

It looks to us like the P/S figures for Cettire remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Cettire, and understanding them should be part of your investment process.

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

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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.