Investor Optimism Abounds International Consolidated Airlines Group S.A. (LON:IAG) But Growth Is Lacking

With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Airlines industry in the United Kingdom, you could be forgiven for feeling indifferent about International Consolidated Airlines Group S.A.'s (LON:IAG) P/S ratio of 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for International Consolidated Airlines Group

How International Consolidated Airlines Group Has Been Performing

International Consolidated Airlines Group could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on International Consolidated Airlines Group will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For International Consolidated Airlines Group?

International Consolidated Airlines Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 28% last year. The latest three year period has also seen an excellent 277% overall rise in revenue, aided by its short-term performance. 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 analysts covering the company suggest revenue should grow by 4.6% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 7.1% per annum, which is noticeably more attractive.

With this in mind, we find it intriguing that International Consolidated Airlines Group's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Key Takeaway

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.

When you consider that International Consolidated Airlines Group's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You should always think about risks. Case in point, we've spotted 2 warning signs for International Consolidated Airlines Group you should be aware of.

If these risks are making you reconsider your opinion on International Consolidated Airlines Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.