Yahoo Finance Shareholders Should Be Pleased With AUTO1 Group SE's (ETR:AG1) Price
With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Specialty Retail industry in Germany, you could be forgiven for feeling indifferent about AUTO1 Group SE's (ETR:AG1) P/S ratio of 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for AUTO1 Group
How AUTO1 Group Has Been Performing
AUTO1 Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on AUTO1 Group.
Is There Some Revenue Growth Forecasted For AUTO1 Group?
In order to justify its P/S ratio, AUTO1 Group would need to produce growth that's similar to the industry.
Taking a look back first, we see that the company grew revenue by an impressive 16% last year. The strong recent performance means it was also able to grow revenue by 84% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Turning to the outlook, the next three years should generate growth of 6.3% per year as estimated by the eleven analysts watching the company. With the industry predicted to deliver 6.4% growth per annum, the company is positioned for a comparable revenue result.
With this information, we can see why AUTO1 Group is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.
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.
Our look at AUTO1 Group's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. 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. Unless these conditions change, they will continue to support the share price at these levels.
And what about other risks? Every company has them, and we've spotted 2 warning signs for AUTO1 Group you should know about.
If these risks are making you reconsider your opinion on AUTO1 Group, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
