eDreams ODIGEO S.A.'s (BME:EDR) Share Price Is Still Matching Investor Opinion Despite 26% Slump

eDreams ODIGEO S.A. (BME:EDR) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Longer-term shareholders would now have taken a real hit with the stock declining 3.8% in the last year.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about eDreams ODIGEO's P/S ratio of 1.1x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in Spain is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for eDreams ODIGEO

What Does eDreams ODIGEO's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, eDreams ODIGEO has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on eDreams ODIGEO .

How Is eDreams ODIGEO's Revenue Growth Trending?

eDreams ODIGEO'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 a decent 4.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 120% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 10% each year during the coming three years according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 8.2% per annum, which is not materially different.

With this information, we can see why eDreams ODIGEO 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.

The Bottom Line On eDreams ODIGEO's P/S

With its share price dropping off a cliff, the P/S for eDreams ODIGEO looks to be in line with the rest of the Hospitality industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look at eDreams ODIGEO's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for eDreams ODIGEO (1 is a bit unpleasant!) that you need to be mindful of.

If you're unsure about the strength of eDreams ODIGEO'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.