Investors Holding Back On Hidrovias do Brasil S.A. (BVMF:HBSA3)

It's not a stretch to say that Hidrovias do Brasil S.A.'s (BVMF:HBSA3) price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" for companies in the Shipping industry in Brazil, where the median P/S ratio is around 1.7x. 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.

View our latest analysis for Hidrovias do Brasil

How Hidrovias do Brasil Has Been Performing

With revenue growth that's inferior to most other companies of late, Hidrovias do Brasil has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

Hidrovias do Brasil's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.2%. The latest three year period has also seen a 28% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 13% over the next year. That's shaping up to be materially higher than the 8.7% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Hidrovias do Brasil'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

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Hidrovias do Brasil currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Hidrovias do Brasil with six simple checks.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.