Revenues Not Telling The Story For Fiera Milano SpA (BIT:FM) After Shares Rise 33%

Fiera Milano SpA (BIT:FM) shareholders have had their patience rewarded with a 33% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 88% in the last year.

Following the firm bounce in price, when almost half of the companies in Italy's Media industry have price-to-sales ratios (or "P/S") below 0.5x, you may consider Fiera Milano as a stock probably not worth researching with its 1.3x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Fiera Milano

How Fiera Milano Has Been Performing

With revenue growth that's superior to most other companies of late, Fiera Milano has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Fiera Milano?

In order to justify its P/S ratio, Fiera Milano would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 5.7% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.0% per annum, which is not materially different.

With this in consideration, we find it intriguing that Fiera Milano's P/S is higher than its industry peers. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

The Key Takeaway

Fiera Milano shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

Analysts are forecasting Fiera Milano's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Fiera Milano (1 shouldn't be ignored!) 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.