Optimistic Investors Push TREVI - Finanziaria Industriale S.p.A. (BIT:TFIN) Shares Up 28% But Growth Is Lacking

TREVI - Finanziaria Industriale S.p.A. (BIT:TFIN) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 49%.

Even after such a large jump in price, there still wouldn't be many who think TREVI - Finanziaria Industriale's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Italy's Construction industry is similar at about 0.7x. 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 TREVI - Finanziaria Industriale

What Does TREVI - Finanziaria Industriale's Recent Performance Look Like?

Recent times haven't been great for TREVI - Finanziaria Industriale as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

TREVI - Finanziaria Industriale's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.9%. Revenue has also lifted 25% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.3% per annum during the coming three years according to the one analyst following the company. That's shaping up to be materially lower than the 16% each year growth forecast for the broader industry.

In light of this, it's curious that TREVI - Finanziaria Industriale's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does TREVI - Finanziaria Industriale's P/S Mean For Investors?

TREVI - Finanziaria Industriale's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

When you consider that TREVI - Finanziaria Industriale'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. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. 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.

Before you take the next step, you should know about the 3 warning signs for TREVI - Finanziaria Industriale (2 are a bit concerning!) that we have uncovered.

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.