Investors Appear Satisfied With AUTO1 Group SE's (ETR:AG1) Prospects As Shares Rocket 27%

AUTO1 Group SE (ETR:AG1) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days were the cherry on top of the stock's 582% gain in the last year, which is nothing short of spectacular.

Since its price has surged higher, given close to half the companies operating in Germany's Specialty Retail industry have price-to-sales ratios (or "P/S") below 0.3x, you may consider AUTO1 Group as a stock to potentially avoid with its 0.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for AUTO1 Group

What Does AUTO1 Group's Recent Performance Look Like?

AUTO1 Group's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on AUTO1 Group will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For AUTO1 Group?

In order to justify its P/S ratio, AUTO1 Group would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.5%. This was backed up an excellent period prior to see revenue up by 47% in total over the last three years. 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 11% per annum during the coming three years according to the eleven analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.6% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why AUTO1 Group's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From AUTO1 Group's P/S?

AUTO1 Group shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 suspected, our examination of AUTO1 Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for AUTO1 Group that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.