Investors Aren't Entirely Convinced By Aston Martin Lagonda Global Holdings plc's (LON:AML) Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Auto industry in the United Kingdom, you could be forgiven for feeling indifferent about Aston Martin Lagonda Global Holdings plc's (LON:AML) P/S ratio of 0.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Check out our latest analysis for Aston Martin Lagonda Global Holdings

What Does Aston Martin Lagonda Global Holdings' P/S Mean For Shareholders?

Recent times haven't been great for Aston Martin Lagonda Global Holdings as its revenue has been falling quicker than most other companies. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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?

The only time you'd be comfortable seeing a P/S like Aston Martin Lagonda Global Holdings' is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.9%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 26% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% per annum as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.1% per annum, which is noticeably less attractive.

With this information, we find it interesting that Aston Martin Lagonda Global Holdings is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Aston Martin Lagonda Global Holdings' P/S Mean For Investors?

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.

Despite enticing revenue growth figures that outpace the industry, Aston Martin Lagonda Global Holdings' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Aston Martin Lagonda Global Holdings that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.