What TREVI - Finanziaria Industriale S.p.A.'s (BIT:TFIN) 36% Share Price Gain Is Not Telling You

TREVI - Finanziaria Industriale S.p.A. (BIT:TFIN) shares have had a really impressive month, gaining 36% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 95% in the last year.

Even after such a large jump in price, it's still not a stretch to say that TREVI - Finanziaria Industriale's price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Construction industry in Italy, where the median P/S ratio is around 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.

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See our latest analysis for TREVI - Finanziaria Industriale

How Has TREVI - Finanziaria Industriale Performed Recently?

Recent revenue growth for TREVI - Finanziaria Industriale has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For TREVI - Finanziaria Industriale?

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

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. The strong recent performance means it was also able to grow revenue by 40% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 5.6% during the coming year according to the two analysts following the company. That's not great when the rest of the industry is expected to grow by 24%.

With this in consideration, we think it doesn't make sense that TREVI - Finanziaria Industriale's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Bottom Line On TREVI - Finanziaria Industriale's P/S

Its shares have lifted substantially and now TREVI - Finanziaria Industriale's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It appears that TREVI - Finanziaria Industriale currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

We don't want to rain on the parade too much, but we did also find 2 warning signs for TREVI - Finanziaria Industriale (1 makes us a bit uncomfortable!) that you need to be mindful of.

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.