Further Upside For Alphaville S.A. (BVMF:AVLL3) Shares Could Introduce Price Risks After 28% Bounce

Alphaville S.A. (BVMF:AVLL3) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 29% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Alphaville's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in Brazil's Consumer Durables industry is similar at about 0.6x. 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.

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Check out our latest analysis for Alphaville

What Does Alphaville's Recent Performance Look Like?

Alphaville certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Alphaville?

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

Taking a look back first, we see that the company grew revenue by an impressive 42% last year. The latest three year period has also seen an excellent 198% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 54% as estimated by the sole analyst watching the company. With the industry only predicted to deliver 17%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Alphaville's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Its shares have lifted substantially and now Alphaville's P/S is back within range of the industry median. 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.

Despite enticing revenue growth figures that outpace the industry, Alphaville's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Before you take the next step, you should know about the 5 warning signs for Alphaville (3 are concerning!) that we have uncovered.

If these risks are making you reconsider your opinion on Alphaville, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.