Intersport Polska S.A.'s (WSE:IPO) Revenues Are Not Doing Enough For Some Investors

When you see that almost half of the companies in the Specialty Retail industry in Poland have price-to-sales ratios (or "P/S") above 0.9x, Intersport Polska S.A. (WSE:IPO) looks to be giving off some buy signals with its 0.1x 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.

See our latest analysis for Intersport Polska

What Does Intersport Polska's P/S Mean For Shareholders?

The revenue growth achieved at Intersport Polska over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Intersport Polska's earnings, revenue and cash flow.

How Is Intersport Polska's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Revenue has also lifted 9.8% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 7.4% shows it's noticeably less attractive.

In light of this, it's understandable that Intersport Polska's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

In line with expectations, Intersport Polska maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Intersport Polska (3 don't sit too well with us!) 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.