I.CO.P. S.p.A. Società Benefit's (BIT:ICOP) Price In Tune With Revenues

When close to half the companies in the Construction industry in Italy have price-to-sales ratios (or "P/S") below 0.6x, you may consider I.CO.P. S.p.A. Società Benefit (BIT:ICOP) as a stock to avoid entirely with its 2.8x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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Check out our latest analysis for I.CO.P.. Società Benefit

How I.CO.P.. Società Benefit Has Been Performing

While the industry has experienced revenue growth lately, I.CO.P.. Società Benefit's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on I.CO.P.. Società Benefit will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For I.CO.P.. Società Benefit?

The only time you'd be truly comfortable seeing a P/S as steep as I.CO.P.. Società Benefit's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 5.9% decrease to the company's top line. 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 5.1% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 77% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 13% per annum, which is noticeably less attractive.

With this information, we can see why I.CO.P.. Società Benefit is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

As we suspected, our examination of I.CO.P.. Società Benefit's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for I.CO.P.. Società Benefit that you should be aware of.

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.