Alstom SA's (EPA:ALO) 27% Jump Shows Its Popularity With Investors

Alstom SA (EPA:ALO) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

Although its price has surged higher, there still wouldn't be many who think Alstom's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in France's Machinery industry is similar at about 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for Alstom

How Alstom Has Been Performing

Recent revenue growth for Alstom has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Alstom.

How Is Alstom's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Alstom's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 6.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 41% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.0% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 6.2% per annum, which is not materially different.

With this information, we can see why Alstom is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Alstom's P/S

Alstom's 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.

Our look at Alstom's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Before you settle on your opinion, we've discovered 2 warning signs for Alstom that you should be aware of.

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