Investors Interested In Aston Martin Lagonda Global Holdings plc's (LON:AML) Revenues

When close to half the companies in the Auto industry in the United Kingdom have price-to-sales ratios (or "P/S") below 0.4x, you may consider Aston Martin Lagonda Global Holdings plc (LON:AML) as a stock to potentially avoid with its 1.2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Aston Martin Lagonda Global Holdings

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

Recent times have been advantageous for Aston Martin Lagonda Global Holdings as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Aston Martin Lagonda Global Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Aston Martin Lagonda Global Holdings' Revenue Growth Trending?

Aston Martin Lagonda Global Holdings' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 29% last year. The latest three year period has also seen an excellent 153% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 10% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 3.4% per year, which is noticeably less attractive.

In light of this, it's understandable that Aston Martin Lagonda Global Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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.

Our look into Aston Martin Lagonda Global Holdings shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Aston Martin Lagonda Global Holdings that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.