MTU Aero Engines AG (ETR:MTX) Not Lagging Industry On Growth Or Pricing

It's not a stretch to say that MTU Aero Engines AG's (ETR:MTX) price-to-sales (or "P/S") ratio of 2.1x right now seems quite "middle-of-the-road" for companies in the Aerospace & Defense industry in Germany, where the median P/S ratio is around 2x. 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.

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Check out our latest analysis for MTU Aero Engines

What Does MTU Aero Engines' Recent Performance Look Like?

MTU Aero Engines certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

MTU Aero Engines' 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.

Retrospectively, the last year delivered an exceptional 38% gain to the company's top line. Pleasingly, revenue has also lifted 77% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 12% per annum as estimated by the analysts watching the company. That's shaping up to be similar to the 14% per annum growth forecast for the broader industry.

With this in mind, it makes sense that MTU Aero Engines' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

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.

Our look at MTU Aero Engines' 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. 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. Take a look at our free balance sheet analysis for MTU Aero Engines with six simple checks on some of these key factors.

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

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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.