thyssenkrupp AG's (ETR:TKA) Shares Leap 34% Yet They're Still Not Telling The Full Story

Despite an already strong run, thyssenkrupp AG (ETR:TKA) shares have been powering on, with a gain of 34% in the last thirty days. Looking further back, the 22% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, thyssenkrupp may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Metals and Mining industry in Germany have P/S ratios greater than 0.7x and even P/S higher than 3x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for thyssenkrupp

How thyssenkrupp Has Been Performing

thyssenkrupp hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

thyssenkrupp's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.5%. The last three years don't look nice either as the company has shrunk revenue by 2.9% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 0.1% during the coming year according to the six analysts following the company. That's shaping up to be similar to the 1.1% growth forecast for the broader industry.

In light of this, it's peculiar that thyssenkrupp's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

thyssenkrupp's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It looks to us like the P/S figures for thyssenkrupp remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for thyssenkrupp you should be aware of.

If you're unsure about the strength of thyssenkrupp'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.