Distribuidora Internacional de Alimentación, S.A. (BME:DIA) Stock Rockets 27% As Investors Are Less Pessimistic Than Expected

The Distribuidora Internacional de Alimentación, S.A. (BME:DIA) share price has done very well over the last month, posting an excellent gain of 27%. Looking back a bit further, it's encouraging to see the stock is up 33% in the last year.

Although its price has surged higher, it's still not a stretch to say that Distribuidora Internacional de Alimentación's price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Consumer Retailing industry in Spain, where the median P/S ratio is around 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Distribuidora Internacional de Alimentación

What Does Distribuidora Internacional de Alimentación's Recent Performance Look Like?

Recent times haven't been great for Distribuidora Internacional de Alimentación as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

Distribuidora Internacional de Alimentación's 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.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 10% overall from three years ago. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 2.2% each year over the next three years. With the industry predicted to deliver 4.8% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's curious that Distribuidora Internacional de Alimentación's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Distribuidora Internacional de Alimentación's P/S

Distribuidora Internacional de Alimentación appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

Our look at the analysts forecasts of Distribuidora Internacional de Alimentación's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Distribuidora Internacional de Alimentación, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Distribuidora Internacional de Alimentación, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.