Wolftank Group AG's (ETR:WAH) Business Is Trailing The Industry But Its Shares Aren't

There wouldn't be many who think Wolftank Group AG's (ETR:WAH) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Commercial Services industry in Germany is very similar. 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 Wolftank Group

What Does Wolftank Group's Recent Performance Look Like?

Wolftank Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Wolftank Group's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 85% last year. The latest three year period has also seen an excellent 182% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 11% per year as estimated by the three analysts watching the company. With the industry predicted to deliver 43% growth per annum, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Wolftank Group's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Key Takeaway

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Given that Wolftank Group's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you settle on your opinion, we've discovered 2 warning signs for Wolftank Group that you should be aware of.

If you're unsure about the strength of Wolftank Group's 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.