Further Upside For Promotora de Informaciones, S.A. (BME:PRS) Shares Could Introduce Price Risks After 43% Bounce

Promotora de Informaciones, S.A. (BME:PRS) shareholders have had their patience rewarded with a 43% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Promotora de Informaciones' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Spain's Media industry is similar at about 0.7x. 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 Promotora de Informaciones

What Does Promotora de Informaciones' P/S Mean For Shareholders?

Promotora de Informaciones could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. 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 Promotora de Informaciones will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Promotora de Informaciones?

Promotora de Informaciones' 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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.8%. Regardless, revenue has managed to lift by a handy 19% 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 8.2% each year as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 3.3% per year, which is noticeably less attractive.

With this in consideration, we find it intriguing that Promotora de Informaciones' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Promotora de Informaciones' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

We've established that Promotora de Informaciones 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Promotora de Informaciones you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.