Investors Still Aren't Entirely Convinced By Voltalia SA's (EPA:VLTSA) Revenues Despite 27% Price Jump

Voltalia SA (EPA:VLTSA) shares have had a really impressive month, gaining 27% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.3% in the last twelve months.

In spite of the firm bounce in price, Voltalia may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.9x, since almost half of all companies in the Renewable Energy industry in France have P/S ratios greater than 4x and even P/S higher than 9x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Voltalia

What Does Voltalia's P/S Mean For Shareholders?

Voltalia could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Voltalia?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Voltalia's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. Pleasingly, revenue has also lifted 52% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 9.9% per annum as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 5.1% each year, which is noticeably less attractive.

With this in consideration, we find it intriguing that Voltalia's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Voltalia's P/S

Voltalia's recent share price jump still sees fails to bring its P/S alongside the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems Voltalia currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Voltalia you should know about.

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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.