Aquafil S.p.A. (BIT:ECNL) Stocks Shoot Up 25% But Its P/S Still Looks Reasonable

The Aquafil S.p.A. (BIT:ECNL) share price has done very well over the last month, posting an excellent gain of 25%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Aquafil's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in Italy is also close to 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Aquafil

How Aquafil Has Been Performing

While the industry has experienced revenue growth lately, Aquafil's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Some Revenue Growth Forecasted For Aquafil?

The only time you'd be comfortable seeing a P/S like Aquafil's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.3%. The last three years don't look nice either as the company has shrunk revenue by 18% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 7.8% per annum over the next three years. That's shaping up to be similar to the 7.4% each year growth forecast for the broader industry.

With this information, we can see why Aquafil is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Aquafil's P/S?

Its shares have lifted substantially and now Aquafil'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.

We've seen that Aquafil maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Aquafil that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.