The House of Agriculture Spiroy S.A. (ATH:SPIR) Stock Rockets 30% As Investors Are Less Pessimistic Than Expected

The The House of Agriculture Spiroy S.A. (ATH:SPIR) share price has done very well over the last month, posting an excellent gain of 30%. Unfortunately, despite the strong performance over the last month, the full year gain of 9.6% isn't as attractive.

Although its price has surged higher, there still wouldn't be many who think House of Agriculture Spiroy's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Greece's Food industry is similar at about 0.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for House of Agriculture Spiroy

How House of Agriculture Spiroy Has Been Performing

As an illustration, revenue has deteriorated at House of Agriculture Spiroy over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on House of Agriculture Spiroy will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, House of Agriculture Spiroy would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.2%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 14% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that House of Agriculture Spiroy is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What We Can Learn From House of Agriculture Spiroy's P/S?

House of Agriculture Spiroy's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of House of Agriculture Spiroy revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Plus, you should also learn about these 2 warning signs we've spotted with House of Agriculture Spiroy.

If you're unsure about the strength of House of Agriculture Spiroy'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.