Investors Continue Waiting On Sidelines For CGG (EPA:CGG)

When close to half the companies operating in the Energy Services industry in France have price-to-sales ratios (or "P/S") above 0.8x, you may consider CGG (EPA:CGG) as an attractive investment with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for CGG

What Does CGG's P/S Mean For Shareholders?

CGG's revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. Those who are bullish on CGG will be hoping that this isn't the case.

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

Is There Any Revenue Growth Forecasted For CGG?

CGG's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. As a result, it also grew revenue by 21% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 5.3% each year over the next three years. With the industry only predicted to deliver 2.4% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that CGG's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

CGG'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.

Plus, you should also learn about these 3 warning signs we've spotted with CGG (including 1 which is a bit unpleasant).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.