Aston Martin Lagonda Global Holdings plc (LON:AML) Might Not Be As Mispriced As It Looks

There wouldn't be many who think Aston Martin Lagonda Global Holdings plc's (LON:AML) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Auto industry in the United Kingdom is similar at about 0.4x. 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.

See our latest analysis for Aston Martin Lagonda Global Holdings

How Has Aston Martin Lagonda Global Holdings Performed Recently?

Recent times have been advantageous for Aston Martin Lagonda Global Holdings as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Aston Martin Lagonda Global Holdings will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Aston Martin Lagonda Global Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Aston Martin Lagonda Global Holdings' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen an excellent 115% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 11% per year as estimated by the nine analysts watching the company. With the industry only predicted to deliver 3.5% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that Aston Martin Lagonda Global Holdings' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Aston Martin Lagonda Global Holdings' P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Aston Martin Lagonda Global Holdings' 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware Aston Martin Lagonda Global Holdings is showing 1 warning sign in our investment analysis, you should know about.

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.