Market Still Lacking Some Conviction On Harboes Bryggeri A/S (CPH:HARB B)

When you see that almost half of the companies in the Beverage industry in Denmark have price-to-sales ratios (or "P/S") above 1.2x, Harboes Bryggeri A/S (CPH:HARB B) looks to be giving off some buy signals with its 0.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Harboes Bryggeri

What Does Harboes Bryggeri's Recent Performance Look Like?

Revenue has risen firmly for Harboes Bryggeri recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Although there are no analyst estimates available for Harboes Bryggeri, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Harboes Bryggeri's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 16% last year. The latest three year period has also seen a 29% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 3.6%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that Harboes Bryggeri's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Harboes Bryggeri revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Harboes Bryggeri you should be aware of.

If you're unsure about the strength of Harboes Bryggeri'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.