Stock Analysis

Some Shareholders Feeling Restless Over Vetropack Holding AG's (VTX:VETN) P/S Ratio

SWX:VETN
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There wouldn't be many who think Vetropack Holding AG's (VTX:VETN) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Packaging industry in Switzerland is very similar. 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.

View our latest analysis for Vetropack Holding

ps-multiple-vs-industry
SWX:VETN Price to Sales Ratio vs Industry February 15th 2025

How Vetropack Holding Has Been Performing

While the industry has experienced revenue growth lately, Vetropack Holding's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Vetropack Holding?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.1%. Regardless, revenue has managed to lift by a handy 18% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 2.5% over the next year. That's not great when the rest of the industry is expected to grow by 3.5%.

In light of this, it's somewhat alarming that Vetropack Holding's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

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.

While Vetropack Holding's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Vetropack Holding 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.