Agfa-Gevaert NV's (EBR:AGFB) Price Is Right But Growth Is Lacking After Shares Rocket 29%

Those holding Agfa-Gevaert NV (EBR:AGFB) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 23% in the last twelve months.

Although its price has surged higher, Agfa-Gevaert's price-to-sales (or "P/S") ratio of 0.1x might still make it look like a strong buy right now compared to the wider Healthcare Services industry in Belgium, where around half of the companies have P/S ratios above 2.3x and even P/S above 6x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Agfa-Gevaert

What Does Agfa-Gevaert's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Agfa-Gevaert'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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Agfa-Gevaert?

Agfa-Gevaert's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 40% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 4.4% over the next year. With the industry predicted to deliver 12% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Agfa-Gevaert's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Agfa-Gevaert's P/S Mean For Investors?

Shares in Agfa-Gevaert have risen appreciably however, its P/S is still subdued. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Agfa-Gevaert's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Agfa-Gevaert that you should be aware of.

If you're unsure about the strength of Agfa-Gevaert'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.