Investors Aren't Buying Corporación Acciona Energías Renovables, S.A.'s (BME:ANE) Revenues

Corporación Acciona Energías Renovables, S.A.'s (BME:ANE) price-to-sales (or "P/S") ratio of 1.7x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Renewable Energy industry in Spain have P/S ratios greater than 2.6x. 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 Corporación Acciona Energías Renovables

What Does Corporación Acciona Energías Renovables' Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Corporación Acciona Energías Renovables has been very sluggish. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

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

How Is Corporación Acciona Energías Renovables' Revenue Growth Trending?

In order to justify its P/S ratio, Corporación Acciona Energías Renovables would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. Still, the latest three year period has seen an excellent 55% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 5.5% each year during the coming three years according to the analysts following the company. Meanwhile, the broader industry is forecast to expand by 5.9% per year, which paints a poor picture.

In light of this, it's understandable that Corporación Acciona Energías Renovables' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does Corporación Acciona Energías Renovables' 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.

As we suspected, our examination of Corporación Acciona Energías Renovables' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Corporación Acciona Energías Renovables' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 5 warning signs for Corporación Acciona Energías Renovables (1 shouldn't be ignored!) that you need to take into consideration.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.