Pod Point Group Holdings Plc's (LON:PODP) Prospects Need A Boost To Lift Shares

You may think that with a price-to-sales (or "P/S") ratio of 1.3x Pod Point Group Holdings Plc (LON:PODP) is a stock worth checking out, seeing as almost half of all the Electrical companies in the United Kingdom have P/S ratios greater than 2.7x and even P/S higher than 30x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Pod Point Group Holdings

What Does Pod Point Group Holdings' Recent Performance Look Like?

Recent times have been advantageous for Pod Point Group Holdings as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Pod Point Group Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Pod Point Group Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 23% per annum during the coming three years according to the five analysts following the company. That's shaping up to be materially lower than the 134% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Pod Point Group Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Pod Point Group Holdings' P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Pod Point Group Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Pod Point Group Holdings, and understanding them should be part of your investment process.

If you're unsure about the strength of Pod Point Group Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.