The Market Doesn't Like What It Sees From Agile Content, S.A.'s (BME:AGIL) Revenues Yet

You may think that with a price-to-sales (or "P/S") ratio of 0.6x Agile Content, S.A. (BME:AGIL) is a stock worth checking out, seeing as almost half of all the Software companies in Spain have P/S ratios greater than 2.2x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Agile Content

What Does Agile Content's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Agile Content's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Agile Content?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.6%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 246% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 7.9% over the next year. Meanwhile, the rest of the industry is forecast to expand by 13%, which is noticeably more attractive.

In light of this, it's understandable that Agile Content's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of Agile Content's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Agile Content (of which 1 is a bit unpleasant!) you should know about.

If these risks are making you reconsider your opinion on Agile Content, 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.