Potential Upside For CCC S.A. (WSE:CCC) Not Without Risk

With a median price-to-sales (or "P/S") ratio of close to 0.8x in the Specialty Retail industry in Poland, you could be forgiven for feeling indifferent about CCC S.A.'s (WSE:CCC) P/S ratio of 1x. 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.

View our latest analysis for CCC

How CCC Has Been Performing

With revenue growth that's inferior to most other companies of late, CCC has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on CCC.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, CCC would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.6% last year. This was backed up an excellent period prior to see revenue up by 65% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 12% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.3% per annum, which is noticeably less attractive.

With this information, we find it interesting that CCC 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 Final Word

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 CCC currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Having said that, be aware CCC is showing 3 warning signs in our investment analysis, and 1 of those is concerning.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.