Portobello S.p.A. (BIT:POR) Soars 34% But It's A Story Of Risk Vs Reward

Those holding Portobello S.p.A. (BIT:POR) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 69% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Portobello's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when it essentially matches the median P/S in Italy's Media industry. 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 Portobello

What Does Portobello's P/S Mean For Shareholders?

Portobello hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Portobello will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Portobello?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 20%. Still, the latest three year period has seen an excellent 62% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 22% per annum as estimated by the one analyst watching the company. With the industry only predicted to deliver 2.6% per annum, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Portobello is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Portobello's P/S

Portobello's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Portobello currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you take the next step, you should know about the 4 warning signs for Portobello (2 are potentially serious!) that we have uncovered.

If these risks are making you reconsider your opinion on Portobello, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.