Shareholders Should Be Pleased With Altus Group Limited's (TSE:AIF) Price

There wouldn't be many who think Altus Group Limited's (TSE:AIF) price-to-sales (or "P/S") ratio of 2.9x is worth a mention when the median P/S for the Real Estate industry in Canada is similar at about 2.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Altus Group

How Altus Group Has Been Performing

Recent times haven't been great for Altus Group as its revenue has been rising slower than most other companies. 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.

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

Is There Some Revenue Growth Forecasted For Altus Group?

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

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. The latest three year period has also seen an excellent 38% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 11% as estimated by the nine analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 9.3%, which is not materially different.

With this in mind, it makes sense that Altus Group's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Altus Group's P/S?

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.

A Altus Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Real Estate industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you settle on your opinion, we've discovered 3 warning signs for Altus Group that you should be aware of.

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.