A Piece Of The Puzzle Missing From Feintool International Holding AG's (VTX:FTON) Share Price

There wouldn't be many who think Feintool International Holding AG's (VTX:FTON) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Auto Components industry in Switzerland is similar at about 0.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Feintool International Holding

What Does Feintool International Holding's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Feintool International Holding's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think Feintool International Holding's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Feintool International Holding?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 16%. As a result, revenue from three years ago have also fallen 2.8% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to remain buoyant, climbing by 7.8% each year during the coming three years according to the three analysts following the company. With the rest of the industry predicted to shrink by 0.9% per annum, that would be a fantastic result.

With this in mind, we find it intriguing that Feintool International Holding's P/S trades in-line with its industry peers. It looks like most investors aren't convinced the company can achieve positive future growth in the face of a shrinking broader industry.

The Bottom Line On Feintool International Holding's P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We note that even though Feintool International Holding trades at a similar P/S as the rest of the industry, it far eclipses them in terms of forecasted revenue growth. There could be some unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Feintool International Holding that you should be aware of.

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.