Market Participants Recognise ENEA S.A.'s (WSE:ENA) Revenues

Explore ENEA's Fair Values from the Community and select yours

There wouldn't be many who think ENEA S.A.'s (WSE:ENA) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Electric Utilities industry in Poland is similar at about 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for ENEA

What Does ENEA's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, ENEA has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. You'd much rather the company improve its revenue if you still believe in the business. If not, then existing shareholders may 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 ENEA.

How Is ENEA's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 24%. Even so, admirably revenue has lifted 31% 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 4.1% per annum as estimated by the five analysts watching the company. With the industry predicted to deliver 3.1% growth per annum, the company is positioned for a comparable revenue result.

In light of this, it's understandable that ENEA's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that ENEA maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 2 warning signs for ENEA you should be aware of.

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.