Not Many Are Piling Into Hipermarc S.A. (SNSE:HIPERMARC) Just Yet

It's not a stretch to say that Hipermarc S.A.'s (SNSE:HIPERMARC) price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" for companies in the Consumer Retailing industry in Chile, where the median P/S ratio is around 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

View our latest analysis for Hipermarc

How Hipermarc Has Been Performing

Recent times have been quite advantageous for Hipermarc as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Hipermarc will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Hipermarc, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Hipermarc?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hipermarc's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 85%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 8.0%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Hipermarc is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Hipermarc's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To our surprise, Hipermarc revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Hipermarc (2 are concerning!) that you should be aware of before investing here.

If you're unsure about the strength of Hipermarc's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.