Cox ABG Group, S.A. (BME:COXG) Might Not Be As Mispriced As It Looks

Cox ABG Group, S.A.'s (BME:COXG) price-to-sales (or "P/S") ratio of 1.1x 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 2.9x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Cox ABG Group

How Has Cox ABG Group Performed Recently?

With revenue growth that's superior to most other companies of late, Cox ABG Group has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Cox ABG Group?

The only time you'd be truly comfortable seeing a P/S as low as Cox ABG Group's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 28% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 37% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 6.5% per year, which is noticeably less attractive.

With this information, we find it odd that Cox ABG Group is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Cox ABG Group's P/S

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.

Cox ABG Group's 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. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Cox ABG Group (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.