Unpleasant Surprises Could Be In Store For Delivery Hero SE's (ETR:DHER) Shares

There wouldn't be many who think Delivery Hero SE's (ETR:DHER) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Hospitality industry in Germany is very similar. 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.

View our latest analysis for Delivery Hero

What Does Delivery Hero's P/S Mean For Shareholders?

Delivery Hero's revenue growth of late has been pretty similar to most other companies. 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.

Keen to find out how analysts think Delivery Hero's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Delivery Hero?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Delivery Hero's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 13% per year during the coming three years according to the analysts following the company. With the industry predicted to deliver 332% growth per annum, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Delivery Hero's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Delivery Hero'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.

Our look at the analysts forecasts of Delivery Hero's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. 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.

Having said that, be aware Delivery Hero is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Delivery Hero'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.