Market Cool On Compagnia dei Caraibi S.p.A.'s (BIT:TIME) Revenues

There wouldn't be many who think Compagnia dei Caraibi S.p.A.'s (BIT:TIME) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Retail Distributors industry in Italy is very similar. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Compagnia dei Caraibi

What Does Compagnia dei Caraibi's Recent Performance Look Like?

Recent times haven't been great for Compagnia dei Caraibi as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. 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 Compagnia dei Caraibi's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a decent 6.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 113% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 19% per annum as estimated by the one analyst watching the company. With the industry only predicted to deliver 3.4% per annum, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Compagnia dei Caraibi 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 Key Takeaway

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.

Looking at Compagnia dei Caraibi's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 4 warning signs for Compagnia dei Caraibi you should be aware of, and 2 of them are a bit unpleasant.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com