Nafpaktos Textile Industry S.A.'s (ATH:NAYP) Subdued P/S Might Signal An Opportunity

With a price-to-sales (or "P/S") ratio of 0.7x Nafpaktos Textile Industry S.A. (ATH:NAYP) may be sending bullish signals at the moment, given that almost half of all the Luxury companies in Greece have P/S ratios greater than 1.3x and even P/S higher than 5x are not unusual. 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 Nafpaktos Textile Industry

What Does Nafpaktos Textile Industry's Recent Performance Look Like?

Revenue has risen firmly for Nafpaktos Textile Industry recently, which is pleasing to see. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Nafpaktos Textile Industry will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Nafpaktos Textile Industry, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Nafpaktos Textile Industry's Revenue Growth Trending?

Nafpaktos Textile Industry's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.1%. This was backed up an excellent period prior to see revenue up by 48% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

This is in contrast to the rest of the industry, which is expected to grow by 6.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Nafpaktos Textile Industry's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does Nafpaktos Textile Industry's P/S Mean For Investors?

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.

We're very surprised to see Nafpaktos Textile Industry currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Nafpaktos Textile Industry (1 can't be ignored!) that you should be aware of.

If you're unsure about the strength of Nafpaktos Textile Industry's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.