The Price Is Right For Suzano S.A. (BVMF:SUZB3)

When you see that almost half of the companies in the Forestry industry in Brazil have price-to-sales ratios (or "P/S") below 0.5x, Suzano S.A. (BVMF:SUZB3) looks to be giving off some sell signals with its 1.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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Check out our latest analysis for Suzano

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

Recent times have been advantageous for Suzano as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Do Revenue Forecasts Match The High P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 27%. The latest three year period has also seen a 18% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 9.2% per annum during the coming three years according to the analysts following the company. With the industry only predicted to deliver 4.1% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Suzano's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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 into Suzano shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Suzano (of which 2 are potentially serious!) you should know about.

If these risks are making you reconsider your opinion on Suzano, 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.