Gurit Holding AG's (VTX:GURN) Price Is Right But Growth Is Lacking After Shares Rocket 26%

Those holding Gurit Holding AG (VTX:GURN) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 73% share price decline over the last year.

Even after such a large jump in price, Gurit Holding's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a strong buy right now compared to the wider Chemicals industry in Switzerland, where around half of the companies have P/S ratios above 3x and even P/S above 6x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Our free stock report includes 3 warning signs investors should be aware of before investing in Gurit Holding. Read for free now.

Check out our latest analysis for Gurit Holding

How Has Gurit Holding Performed Recently?

While the industry has experienced revenue growth lately, Gurit Holding's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

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

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Gurit Holding's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.1%. As a result, revenue from three years ago have also fallen 7.7% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 5.0% per year during the coming three years according to the three analysts following the company. That's not great when the rest of the industry is expected to grow by 4.1% each year.

In light of this, it's understandable that Gurit Holding's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does Gurit Holding's P/S Mean For Investors?

Gurit Holding's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Gurit Holding's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Gurit Holding's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Gurit Holding is showing 3 warning signs in our investment analysis, and 1 of those is significant.

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.