Investors Continue Waiting On Sidelines For DEME Group NV (EBR:DEME)

There wouldn't be many who think DEME Group NV's (EBR:DEME) price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S for the Construction industry in Belgium is similar at about 1.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for DEME Group

What Does DEME Group's Recent Performance Look Like?

DEME Group's revenue growth of late has been pretty similar to most other companies. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on DEME Group will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

How Is DEME Group's Revenue Growth Trending?

In order to justify its P/S ratio, DEME Group would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.7% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 8.6% each year as estimated by the five analysts watching the company. With the industry only predicted to deliver 4.3% each year, the company is positioned for a stronger revenue result.

With this information, we find it interesting that DEME Group is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

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.

Looking at DEME Group's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for DEME Group with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.