Market Cool On Estrima S.p.A.'s (BIT:BIRO) Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Auto industry in Italy, you could be forgiven for feeling indifferent about Estrima S.p.A.'s (BIT:BIRO) P/S ratio of 0.1x. 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 Estrima

What Does Estrima's Recent Performance Look Like?

Recent times have been advantageous for Estrima as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 33% each year over the next three years. With the industry only predicted to deliver 4.0% each year, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Estrima's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Estrima's P/S Mean For Investors?

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.

Despite enticing revenue growth figures that outpace the industry, Estrima's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 1 warning sign for Estrima that you need to take into consideration.

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.