Claranova SE (EPA:CLA) Shares Fly 29% But Investors Aren't Buying For Growth

Claranova SE (EPA:CLA) shares have continued their recent momentum with a 29% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Even after such a large jump in price, Claranova may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Software industry in France have P/S ratios greater than 2.1x and even P/S higher than 6x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Claranova

How Claranova Has Been Performing

Recent revenue growth for Claranova has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Claranova will be hoping that this isn't the case.

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

Is There Any Revenue Growth Forecasted For Claranova?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 7.1% last year. Revenue has also lifted 24% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 3.8% each year over the next three years. With the industry predicted to deliver 8.8% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Claranova's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Claranova's P/S Mean For Investors?

Despite Claranova's share price climbing recently, its P/S still lags most other companies. 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.

As we suspected, our examination of Claranova's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You need to take note of risks, for example - Claranova has 3 warning signs (and 1 which is significant) we think you should know about.

If you're unsure about the strength of Claranova's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.