With Siemens Energy AG (ETR:ENR) It Looks Like You'll Get What You Pay For

With a median price-to-sales (or "P/S") ratio of close to 2x in the Electrical industry in Germany, you could be forgiven for feeling indifferent about Siemens Energy AG's (ETR:ENR) P/S ratio of 2.1x. 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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

See our latest analysis for Siemens Energy

How Has Siemens Energy Performed Recently?

Recent revenue growth for Siemens Energy has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. 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.

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

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

Siemens Energy's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow revenue by 34% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 8.9% per annum over the next three years. With the industry predicted to deliver 9.7% growth each year, the company is positioned for a comparable revenue result.

With this information, we can see why Siemens Energy is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

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.

Our look at Siemens Energy's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. 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. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Siemens Energy with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Siemens Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.