CVC Brasil Operadora e Agência de Viagens S.A.'s (BVMF:CVCB3) Price Is Out Of Tune With Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.9x in the Hospitality industry in Brazil, you could be forgiven for feeling indifferent about CVC Brasil Operadora e Agência de Viagens S.A.'s (BVMF:CVCB3) P/S ratio of 0.7x. 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 CVC Brasil Operadora e Agência de Viagens

How Has CVC Brasil Operadora e Agência de Viagens Performed Recently?

With revenue growth that's superior to most other companies of late, CVC Brasil Operadora e Agência de Viagens has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think CVC Brasil Operadora e Agência de Viagens' future stacks up against the industry? In that case, our free report is a great place to start.

How Is CVC Brasil Operadora e Agência de Viagens' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like CVC Brasil Operadora e Agência de Viagens' is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 26%. Pleasingly, revenue has also lifted 204% 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.

Turning to the outlook, the next year should generate growth of 0.8% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 17% growth forecast for the broader industry.

In light of this, it's curious that CVC Brasil Operadora e Agência de Viagens' P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

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.

Our look at the analysts forecasts of CVC Brasil Operadora e Agência de Viagens' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

And what about other risks? Every company has them, and we've spotted 3 warning signs for CVC Brasil Operadora e Agência de Viagens you should know about.

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.