Even With A 29% Surge, Cautious Investors Are Not Rewarding Riber S.A.'s (EPA:ALRIB) Performance Completely

Despite an already strong run, Riber S.A. (EPA:ALRIB) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 91% in the last year.

Although its price has surged higher, it's still not a stretch to say that Riber's price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in France, where the median P/S ratio is around 1.7x. 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.

View our latest analysis for Riber

What Does Riber's Recent Performance Look Like?

Recent times have been pleasing for Riber as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. 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.

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

Is There Some Revenue Growth Forecasted For Riber?

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

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The strong recent performance means it was also able to grow revenue by 46% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to remain somewhat buoyant, growing by 4.3% during the coming year according to the dual analysts following the company. This isn't typically strong growth, but with the rest of the industry predicted to shrink by 5.3%, that would be a solid result.

Despite the marginal growth, we find it odd that Riber is trading at a fairly similar P/S to the industry. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

What We Can Learn From Riber's P/S?

Riber's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We note that even though Riber trades at a similar P/S as the rest of the industry, it far eclipses them in terms of forecasted revenue growth. There could be some unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

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

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.