Cellnex Telecom, S.A. (BME:CLNX) Not Lagging Industry On Growth Or Pricing

When close to half the companies in the Telecom industry in Spain have price-to-sales ratios (or "P/S") below 1.1x, you may consider Cellnex Telecom, S.A. (BME:CLNX) as a stock to avoid entirely with its 6.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Cellnex Telecom

What Does Cellnex Telecom's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Cellnex Telecom has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Cellnex Telecom's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Cellnex Telecom's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. Pleasingly, revenue has also lifted 126% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 6.7% per annum as estimated by the analysts watching the company. With the industry only predicted to deliver 1.8% per annum, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Cellnex Telecom's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Cellnex Telecom's P/S Mean For Investors?

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 Cellnex Telecom maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Telecom industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Cellnex Telecom with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.