Improved Revenues Required Before Just Eat Takeaway.com N.V. (AMS:TKWY) Shares Find Their Feet

When close to half the companies operating in the Hospitality industry in the Netherlands have price-to-sales ratios (or "P/S") above 1.1x, you may consider Just Eat Takeaway.com N.V. (AMS:TKWY) as an attractive investment with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Just Eat Takeaway.com

How Just Eat Takeaway.com Has Been Performing

Just Eat Takeaway.com 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Just Eat Takeaway.com?

In order to justify its P/S ratio, Just Eat Takeaway.com would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 4.1% decrease to the company's top line. Even so, admirably revenue has lifted 64% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 5.3% per year as estimated by the analysts watching the company. With the industry predicted to deliver 7.3% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Just Eat Takeaway.com's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

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.

As we suspected, our examination of Just Eat Takeaway.com's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Just Eat Takeaway.com that you need to be mindful of.

If these risks are making you reconsider your opinion on Just Eat Takeaway.com, 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.