The Market Lifts Alphaville S.A. (BVMF:AVLL3) Shares 30% But It Can Do More

Alphaville S.A. (BVMF:AVLL3) shareholders have had their patience rewarded with a 30% share price jump in the last month. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.5% over the last year.

Although its price has surged higher, there still wouldn't be many who think Alphaville's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Brazil's Consumer Durables industry is similar at about 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Alphaville

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

Recent times have been advantageous for Alphaville as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Alphaville?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Alphaville's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 73% last year. Pleasingly, revenue has also lifted 103% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 70% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 19%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Alphaville's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Alphaville's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at Alphaville's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You should always think about risks. Case in point, we've spotted 4 warning signs for Alphaville you should be aware of, and 2 of them shouldn't be ignored.

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).

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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.