Subdued Growth No Barrier To Operadora de Sites Mexicanos, S.A.B. de C.V. (BMV:SITES1A-1) With Shares Advancing 39%

Operadora de Sites Mexicanos, S.A.B. de C.V. (BMV:SITES1A-1) shareholders have had their patience rewarded with a 39% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

After such a large jump in price, given around half the companies in Mexico's Telecom industry have price-to-sales ratios (or "P/S") below 0.8x, you may consider Operadora de Sites Mexicanos. de as a stock to avoid entirely with its 4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

See our latest analysis for Operadora de Sites Mexicanos. de

How Has Operadora de Sites Mexicanos. de Performed Recently?

With revenue growth that's superior to most other companies of late, Operadora de Sites Mexicanos. de has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Operadora de Sites Mexicanos. de.

How Is Operadora de Sites Mexicanos. de's Revenue Growth Trending?

Operadora de Sites Mexicanos. de's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.3% last year. Pleasingly, revenue has also lifted 47% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 4.1% per annum during the coming three years according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 4.7% per annum, which is not materially different.

With this information, we find it interesting that Operadora de Sites Mexicanos. de is trading at a high P/S compared to the industry. 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

Shares in Operadora de Sites Mexicanos. de have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Given Operadora de Sites Mexicanos. de's future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. 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.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Operadora de Sites Mexicanos. de (1 is concerning!) that you should be aware of before investing here.

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.

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

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.