It's A Story Of Risk Vs Reward With Helios Towers plc (LON:HTWS)

Helios Towers plc's (LON:HTWS) price-to-sales (or "P/S") ratio of 1.5x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Telecom industry in the United Kingdom have P/S ratios greater than 2.5x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Helios Towers

What Does Helios Towers' Recent Performance Look Like?

Recent times have been advantageous for Helios Towers 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Helios Towers.

Is There Any Revenue Growth Forecasted For Helios Towers?

In order to justify its P/S ratio, Helios Towers would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Pleasingly, revenue has also lifted 80% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 8.3% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 1.9% each year, which is noticeably less attractive.

In light of this, it's peculiar that Helios Towers' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Helios Towers' P/S

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.

A look at Helios Towers' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Helios Towers you should be aware 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.