IBU-tec advanced materials AG's (ETR:IBU) Shares Climb 35% But Its Business Is Yet to Catch Up

IBU-tec advanced materials AG (ETR:IBU) shares have continued their recent momentum with a 35% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 17% in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about IBU-tec advanced materials' P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Chemicals industry in Germany is also close to 0.7x. 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 IBU-tec advanced materials

What Does IBU-tec advanced materials' P/S Mean For Shareholders?

Recent times have been pleasing for IBU-tec advanced materials as its revenue has risen in spite of the industry's average revenue going into reverse. One possibility is that the P/S ratio is moderate because investors think the company's revenue will be less resilient moving forward. Those who are bullish on IBU-tec advanced materials will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

Keen to find out how analysts think IBU-tec advanced materials' future stacks up against the industry? In that case, our free report is a great place to start.

How Is IBU-tec advanced materials' Revenue Growth Trending?

In order to justify its P/S ratio, IBU-tec advanced materials would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.4% last year. The solid recent performance means it was also able to grow revenue by 17% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 0.2% per annum during the coming three years according to the only analyst following the company. With the industry predicted to deliver 2.9% growth per annum, that's a disappointing outcome.

In light of this, it's somewhat alarming that IBU-tec advanced materials' P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Bottom Line On IBU-tec advanced materials' P/S

Its shares have lifted substantially and now IBU-tec advanced materials' P/S is back within range of the industry median. 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.

While IBU-tec advanced materials' P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

It is also worth noting that we have found 2 warning signs for IBU-tec advanced materials that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.