Vestas Wind Systems A/S' (CPH:VWS) P/S Is Still On The Mark Following 25% Share Price Bounce

Vestas Wind Systems A/S (CPH:VWS) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 42% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that Vestas Wind Systems' price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Electrical industry in Denmark, where the median P/S ratio is around 1.1x. 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 Vestas Wind Systems

What Does Vestas Wind Systems' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Vestas Wind Systems has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Vestas Wind Systems' 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.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Revenue has also lifted 12% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 7.8% per annum over the next three years. With the industry predicted to deliver 7.0% growth each year, the company is positioned for a comparable revenue result.

With this information, we can see why Vestas Wind Systems is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Vestas Wind Systems' P/S Mean For Investors?

Vestas Wind Systems' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A Vestas Wind Systems' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Electrical industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

It is also worth noting that we have found 1 warning sign for Vestas Wind Systems 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.