Investors Holding Back On TrenDevice S.p.A. (BIT:TD)

There wouldn't be many who think TrenDevice S.p.A.'s (BIT:TD) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Specialty Retail industry in Italy is very similar. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for TrenDevice

What Does TrenDevice's Recent Performance Look Like?

TrenDevice could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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 TrenDevice's future stacks up against the industry? In that case, our free report is a great place to start.

How Is TrenDevice's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. Even so, admirably revenue has lifted 126% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 22% over the next year. With the industry only predicted to deliver 7.4%, the company is positioned for a stronger revenue result.

In light of this, it's curious that TrenDevice's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On TrenDevice's P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that TrenDevice 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

We don't want to rain on the parade too much, but we did also find 4 warning signs for TrenDevice (3 shouldn't be ignored!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.