A Piece Of The Puzzle Missing From DFDS A/S' (CPH:DFDS) 26% Share Price Climb

DFDS A/S (CPH:DFDS) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 49% in the last twelve months.

In spite of the firm bounce in price, when close to half the companies operating in Denmark's Shipping industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider DFDS as an enticing stock to check out with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for DFDS

What Does DFDS' Recent Performance Look Like?

Recent times haven't been great for DFDS as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

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

In order to justify its P/S ratio, DFDS would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.2%. The latest three year period has also seen an excellent 49% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue growth will be highly resilient over the next year growing by 5.7%. With the rest of the industry predicted to shrink by 4.5%, that would be a fantastic result.

In light of this, it's quite peculiar that DFDS' P/S sits below the majority of other companies. It looks like most investors aren't convinced at all that the company can achieve positive future growth in the face of a shrinking broader industry.

What We Can Learn From DFDS' P/S?

DFDS' stock price has surged recently, but its but its P/S still remains modest. 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.

Our look into DFDS' analyst forecasts has shown that it could be trading at a significant discount in terms of P/S, as it is expected to far outperform the industry. We believe there could be some underlying risks that are keeping the P/S modest in the context of above-average revenue growth. Perhaps there is some hesitation about the company's ability to keep swimming against the current of the broader industry turmoil. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for DFDS (1 is a bit unpleasant!) that you need to be mindful 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.