Revenues Tell The Story For CLERHP Estructuras, S.A. (BME:CLR)

When close to half the companies in the Construction industry in Spain have price-to-sales ratios (or "P/S") below 0.6x, you may consider CLERHP Estructuras, S.A. (BME:CLR) as a stock to avoid entirely with its 3.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for CLERHP Estructuras

What Does CLERHP Estructuras' P/S Mean For Shareholders?

CLERHP Estructuras certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think CLERHP Estructuras' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For CLERHP Estructuras?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like CLERHP Estructuras' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The strong recent performance means it was also able to grow revenue by 71% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 94% per year during the coming three years according to the two analysts following the company. With the industry only predicted to deliver 4.4% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why CLERHP Estructuras' 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.

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.

As we suspected, our examination of CLERHP Estructuras' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - CLERHP Estructuras has 6 warning signs (and 3 which are a bit concerning) we think you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.