Investors Still Aren't Entirely Convinced By eDreams ODIGEO S.A.'s (BME:EDR) Revenues Despite 25% Price Jump

eDreams ODIGEO S.A. (BME:EDR) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Looking further back, the 12% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, it's still not a stretch to say that eDreams ODIGEO's price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Hospitality industry in Spain, where the median P/S ratio is around 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for eDreams ODIGEO

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

eDreams ODIGEO could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For eDreams ODIGEO?

The only time you'd be comfortable seeing a P/S like eDreams ODIGEO's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.6% last year. Pleasingly, revenue has also lifted 181% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the six analysts watching the company. With the industry only predicted to deliver 7.6% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that eDreams ODIGEO's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From eDreams ODIGEO's P/S?

eDreams ODIGEO's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the 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.

We've established that eDreams ODIGEO currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 1 warning sign for eDreams ODIGEO that we have uncovered.

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.