Vivendi SE (EPA:VIV) Could Be Riskier Than It Looks

With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Media industry in France, you could be forgiven for feeling indifferent about Vivendi SE's (EPA:VIV) P/S ratio of 1x. 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.

View our latest analysis for Vivendi

How Has Vivendi Performed Recently?

Recent times have been advantageous for Vivendi as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 9.5%. The latest three year period has also seen a 21% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 23% per annum during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.5% each year, which is noticeably less attractive.

With this information, we find it interesting that Vivendi is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Vivendi's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Looking at Vivendi's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Vivendi that you need to take into consideration.

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.