Investors Still Aren't Entirely Convinced By Nacon S.A.'s (EPA:NACON) Revenues Despite 26% Price Jump

Nacon S.A. (EPA:NACON) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 52% share price drop in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Nacon's P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Consumer Durables industry in France is also close to 0.3x. 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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See our latest analysis for Nacon

How Nacon Has Been Performing

Recent revenue growth for Nacon has been in line with the industry. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. 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.

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

How Is Nacon's Revenue Growth Trending?

In order to justify its P/S ratio, Nacon would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period was better as it's delivered a decent 7.7% overall rise in revenue. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.7% per year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 4.5% per year, which is noticeably less attractive.

In light of this, it's curious that Nacon's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Its shares have lifted substantially and now Nacon's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Nacon's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Nacon that we have uncovered.

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).

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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.