Investors Interested In Arbonia AG's (VTX:ARBN) Revenues

Arbonia AG's (VTX:ARBN) price-to-sales (or "P/S") ratio of 1.8x may not look like an appealing investment opportunity when you consider close to half the companies in the Building industry in Switzerland have P/S ratios below 1.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Arbonia

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

With revenue growth that's superior to most other companies of late, Arbonia has been doing relatively well. 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.

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

How Is Arbonia's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Arbonia's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 142%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 55% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 13% each year during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 6.3% each year growth forecast for the broader industry.

With this information, we can see why Arbonia is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Arbonia's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Arbonia maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Building industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Arbonia (1 is a bit concerning!) that you need to be mindful 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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.