Lacklustre Performance Is Driving Atenor SA's (EBR:ATEB) Low P/S

You may think that with a price-to-sales (or "P/S") ratio of 0.6x Atenor SA (EBR:ATEB) is definitely a stock worth checking out, seeing as almost half of all the Real Estate companies in Belgium have P/S ratios greater than 4.5x and even P/S above 7x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

See our latest analysis for Atenor

What Does Atenor's P/S Mean For Shareholders?

Atenor certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Atenor.

How Is Atenor's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Atenor's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an explosive gain to the company's top line. The amazing performance means it was also able to grow revenue by 85% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 7.8% per annum as estimated by the dual analysts watching the company. Meanwhile, the broader industry is forecast to expand by 12% each year, which paints a poor picture.

In light of this, it's understandable that Atenor's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Atenor's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's clear to see that Atenor maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Atenor's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Atenor (at least 1 which is significant), and understanding them should be part of your investment process.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.