Viridien Société anonyme (EPA:VIRI) Stock Rockets 26% As Investors Are Less Pessimistic Than Expected

Viridien Société anonyme (EPA:VIRI) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 81% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Viridien Société anonyme's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in France's Energy Services industry is similar at about 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Viridien Société anonyme

How Has Viridien Société anonyme Performed Recently?

With revenue growth that's superior to most other companies of late, Viridien Société anonyme has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For Viridien Société anonyme?

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

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 14% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 1.8% each year over the next three years. That's shaping up to be materially lower than the 3.8% per year growth forecast for the broader industry.

With this information, we find it interesting that Viridien Société anonyme is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Viridien Société anonyme's P/S?

Its shares have lifted substantially and now Viridien Société anonyme's P/S is back within range of the industry median. 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.

Given that Viridien Société anonyme's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Viridien Société anonyme (1 is potentially serious) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.