The Price Is Right For Hoftex Group AG (MUN:NBH)

With a median price-to-sales (or "P/S") ratio of close to 0.6x in the Luxury industry in Germany, you could be forgiven for feeling indifferent about Hoftex Group AG's (MUN:NBH) P/S ratio of 0.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Hoftex Group

What Does Hoftex Group's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Hoftex Group over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hoftex Group's earnings, revenue and cash flow.

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

Hoftex Group'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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.3%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

It's interesting to note that the rest of the industry is similarly expected to grow by 2.3% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Hoftex Group's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Hoftex Group's P/S

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.

As we've seen, Hoftex Group's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Hoftex Group (including 1 which doesn't sit too well with us).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.