Many Still Looking Away From Solutions 30 SE (EPA:S30)

There wouldn't be many who think Solutions 30 SE's (EPA:S30) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the IT industry in France is similar at about 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Solutions 30

What Does Solutions 30's Recent Performance Look Like?

Recent times haven't been great for Solutions 30 as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Solutions 30.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Solutions 30 would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Pleasingly, revenue has also lifted 32% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 12% each year over the next three years. That's shaping up to be materially higher than the 5.6% each year growth forecast for the broader industry.

With this information, we find it interesting that Solutions 30 is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

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.

Looking at Solutions 30's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Solutions 30 that you should be aware of.

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.