Insufficient Growth At Ardagh Metal Packaging S.A. (NYSE:AMBP) Hampers Share Price

When you see that almost half of the companies in the Packaging industry in the United States have price-to-sales ratios (or "P/S") above 0.9x, Ardagh Metal Packaging S.A. (NYSE:AMBP) looks to be giving off some buy signals with its 0.3x 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.

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View our latest analysis for Ardagh Metal Packaging

How Has Ardagh Metal Packaging Performed Recently?

Recent times haven't been great for Ardagh Metal Packaging as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Ardagh Metal Packaging?

In order to justify its P/S ratio, Ardagh Metal Packaging would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Fortunately, a few good years before that means that it was still able to grow revenue by 21% in total over the last three years. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 2.9% each year during the coming three years according to the seven analysts following the company. That's shaping up to be materially lower than the 8.9% per annum growth forecast for the broader industry.

In light of this, it's understandable that Ardagh Metal Packaging's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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.

As we suspected, our examination of Ardagh Metal Packaging's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - Ardagh Metal Packaging has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Ardagh Metal Packaging, 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.