Optimistic Investors Push Ariston Holding N.V. (BIT:ARIS) Shares Up 32% But Growth Is Lacking

Despite an already strong run, Ariston Holding N.V. (BIT:ARIS) shares have been powering on, with a gain of 32% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 5.7% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Ariston Holding's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when it essentially matches the median P/S in Italy's Building industry. 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.

Our free stock report includes 4 warning signs investors should be aware of before investing in Ariston Holding. Read for free now.

Check out our latest analysis for Ariston Holding

How Has Ariston Holding Performed Recently?

Recent times haven't been great for Ariston Holding as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Ariston Holding's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 15% decrease to the company's top line. Even so, admirably revenue has lifted 33% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 2.5% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 5.1% each year, which is noticeably more attractive.

With this information, we find it interesting that Ariston Holding is trading at a fairly similar P/S compared to the industry. 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 Final Word

Its shares have lifted substantially and now Ariston Holding's P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

When you consider that Ariston Holding'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.

Having said that, be aware Ariston Holding is showing 4 warning signs in our investment analysis, and 1 of those is potentially serious.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.