Yahoo Finance The Price Is Right For AGROB Immobilien AG (FRA:AGR)
AGROB Immobilien AG's (FRA:AGR) price-to-sales (or "P/S") ratio of 14.1x may look like a poor investment opportunity when you consider close to half the companies in the Real Estate industry in Germany have P/S ratios below 3.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
View our latest analysis for AGROB Immobilien
What Does AGROB Immobilien's Recent Performance Look Like?
AGROB Immobilien has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S ratio is high because investors think this good revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
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 AGROB Immobilien's earnings, revenue and cash flow.
Is There Enough Revenue Growth Forecasted For AGROB Immobilien?
The only time you'd be truly comfortable seeing a P/S as steep as AGROB Immobilien's is when the company's growth is on track to outshine the industry decidedly.
Taking a look back first, we see that the company managed to grow revenues by a handy 3.3% last year. The latest three year period has also seen a 6.5% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.
Comparing that to the industry, which is predicted to shrink 37% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.
With this in mind, it's clear to us why AGROB Immobilien's P/S exceeds that of its industry peers. Investors are willing to pay more for a stock they hope will buck the trend of the broader industry going backwards. However, its current revenue trajectory will be very difficult to maintain against the headwinds other companies are facing at the moment.
The Bottom Line On AGROB Immobilien's P/S
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.
As we suspected, our examination of AGROB Immobilien revealed its growing revenue over the medium-term is helping prop up its high P/S compared to its peers, given the industry is set to shrink. Right now shareholders are comfortable with the P/S as they are quite confident revenues aren't under threat. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. Otherwise, it's hard to see the share price falling strongly in the near future if its revenue performance persists.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with AGROB Immobilien (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.
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.
