Investors Still Aren't Entirely Convinced By Acteos SA's (EPA:EOS) Revenues Despite 26% Price Jump
Acteos SA (EPA:EOS) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.9% over the last year.
In spite of the firm bounce in price, Acteos' price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Software industry in France, where around half of the companies have P/S ratios above 2.1x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Acteos
How Has Acteos Performed Recently?
The revenue growth achieved at Acteos over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. 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 out of favour.
Although there are no analyst estimates available for Acteos, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Acteos would need to produce sluggish growth that's trailing the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 28%. Revenue has also lifted 22% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.
It's interesting to note that the rest of the industry is similarly expected to grow by 7.5% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
With this in consideration, we find it intriguing that Acteos' P/S falls short of its industry peers. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.
The Bottom Line On Acteos' P/S
Acteos' stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
The fact that Acteos currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.
Before you take the next step, you should know about the 2 warning signs for Acteos that we have uncovered.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
About ENXTPA:EOS
Acteos
Designs, develops, integrates, and provides software and related services in the field of supply chain management mobile solutions in France, Germany, and Lebanon.
Low and slightly overvalued.