Koenig & Bauer AG's (ETR:SKB) 38% Jump Shows Its Popularity With Investors

Koenig & Bauer AG (ETR:SKB) shares have had a really impressive month, gaining 38% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.3% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Koenig & Bauer's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Germany's Machinery industry is similar at about 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Koenig & Bauer

What Does Koenig & Bauer's Recent Performance Look Like?

Koenig & Bauer could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. 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 Koenig & Bauer will help you uncover what's on the horizon.

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

Koenig & Bauer'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.

Retrospectively, the last year delivered a frustrating 2.2% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 25% in total. 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 six analysts covering the company suggest revenue should grow by 5.1% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.1% per annum, which is not materially different.

In light of this, it's understandable that Koenig & Bauer's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Koenig & Bauer's P/S?

Koenig & Bauer appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look at Koenig & Bauer's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - Koenig & Bauer has 1 warning sign we think 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.