AVA Risk Group Limited (ASX:AVA) Could Be Riskier Than It Looks

Simply Wall St

AVA Risk Group Limited's (ASX:AVA) price-to-sales (or "P/S") ratio of 1x might make it look like a buy right now compared to the Electronic industry in Australia, where around half of the companies have P/S ratios above 1.6x and even P/S above 8x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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ASX:AVA Price to Sales Ratio vs Industry July 7th 2025

What Does AVA Risk Group's P/S Mean For Shareholders?

AVA Risk Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

AVA Risk Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Pleasingly, revenue has also lifted 94% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 36% during the coming year according to the sole analyst following the company. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

With this information, we find it odd that AVA Risk Group is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

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.

A look at AVA Risk Group's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Valuation is complex, but we're here to simplify it.

Discover if AVA Risk Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.