Técnicas Reunidas, S.A.'s (BME:TRE) Shares Leap 39% Yet They're Still Not Telling The Full Story

Despite an already strong run, Técnicas Reunidas, S.A. (BME:TRE) shares have been powering on, with a gain of 39% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 50% in the last year.

Even after such a large jump in price, it would still be understandable if you think Técnicas Reunidas is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in Spain's Energy Services industry have P/S ratios above 0.8x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Técnicas Reunidas

What Does Técnicas Reunidas' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Técnicas Reunidas' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Técnicas Reunidas?

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

Retrospectively, the last year delivered a frustrating 12% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 30% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next three years should generate growth of 6.3% per annum as estimated by the seven analysts watching the company. With the industry only predicted to deliver 1.8% each year, the company is positioned for a stronger revenue result.

With this information, we find it odd that Técnicas Reunidas is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Despite Técnicas Reunidas' share price climbing recently, its P/S still lags most other companies. 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.

Técnicas Reunidas' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Técnicas Reunidas that you need to take into consideration.

If you're unsure about the strength of Técnicas Reunidas' 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.