Siemens Energy AG's (ETR:ENR) 31% Jump Shows Its Popularity With Investors

Siemens Energy AG (ETR:ENR) shareholders have had their patience rewarded with a 31% share price jump in the last month. The last month tops off a massive increase of 162% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Siemens Energy's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in Germany's Electrical industry is similar at about 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Siemens Energy

How Has Siemens Energy Performed Recently?

Siemens Energy's revenue growth of late has been pretty similar to most other companies. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Siemens Energy?

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

If we review the last year of revenue growth, the company posted a worthy increase of 4.6%. Revenue has also lifted 19% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 7.0% per annum over the next three years. With the industry predicted to deliver 8.1% growth per year, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Siemens Energy's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Siemens Energy's P/S Mean For Investors?

Siemens Energy's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've seen that Siemens Energy maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Siemens Energy with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Siemens Energy'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.