Gurit Holding AG's (VTX:GURN) Price Is Right But Growth Is Lacking After Shares Rocket 25%

Gurit Holding AG (VTX:GURN) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the last month did very little to improve the 74% share price decline over the last year.

Although its price has surged higher, when around half the companies operating in Switzerland's Chemicals industry have price-to-sales ratios (or "P/S") above 3.2x, you may still consider Gurit Holding as an incredibly enticing stock to check out with its 0.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Gurit Holding

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

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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Gurit Holding?

The only time you'd be truly comfortable seeing a P/S as depressed as Gurit Holding's is when the company's growth is on track to lag the industry decidedly.

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%. The last three years don't look nice either as the company has shrunk revenue by 23% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue growth is heading into negative territory, declining 0.2% per year over the next three years. That's not great when the rest of the industry is expected to grow by 4.8% per annum.

With this in consideration, we find it intriguing that Gurit Holding's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. 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.

It's clear to see that Gurit Holding maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Gurit Holding (2 can't be ignored) 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.