Croatia Airlines d.d.'s (ZGSE:CRAL) P/S Is On The Mark

When close to half the companies in the Airlines industry in Croatia have price-to-sales ratios (or "P/S") below 0.4x, you may consider Croatia Airlines d.d. (ZGSE:CRAL) as a stock to potentially avoid with its 1.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Croatia Airlines d.d

What Does Croatia Airlines d.d's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Croatia Airlines d.d has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Croatia Airlines d.d's earnings, revenue and cash flow.

How Is Croatia Airlines d.d's Revenue Growth Trending?

Croatia Airlines d.d's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 37% last year. The latest three year period has also seen an excellent 108% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 8.7% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Croatia Airlines d.d is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Croatia Airlines d.d's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Croatia Airlines d.d revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Croatia Airlines d.d (of which 2 are a bit concerning!) you should know about.

If these risks are making you reconsider your opinion on Croatia Airlines d.d, 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.