Many Still Looking Away From Tenax International S.p.A. (BIT:TNX)

Tenax International S.p.A.'s (BIT:TNX) price-to-sales (or "P/S") ratio of 0.3x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Machinery industry in Italy have P/S ratios greater than 0.8x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Tenax International

What Does Tenax International's P/S Mean For Shareholders?

Recent times have been advantageous for Tenax International as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Tenax International?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Tenax International's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.6% last year. This was backed up an excellent period prior to see revenue up by 108% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 14% per annum during the coming three years according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.0% per annum, which is noticeably less attractive.

In light of this, it's peculiar that Tenax International's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

Tenax International's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Tenax International (3 are potentially serious!) that you need to be mindful 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.