Dekel Agri-Vision plc's (LON:DKL) Shares Not Telling The Full Story
There wouldn't be many who think Dekel Agri-Vision plc's (LON:DKL) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Food industry in the United Kingdom is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for Dekel Agri-Vision
What Does Dekel Agri-Vision's Recent Performance Look Like?
Dekel Agri-Vision hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.
Keen to find out how analysts think Dekel Agri-Vision's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The P/S?
The only time you'd be comfortable seeing a P/S like Dekel Agri-Vision's is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a frustrating 7.0% decrease to the company's top line. Even so, admirably revenue has lifted 51% 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 year should generate growth of 21% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 4.4%, the company is positioned for a stronger revenue result.
With this information, we find it interesting that Dekel Agri-Vision is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Bottom Line On Dekel Agri-Vision's P/S
While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
We've established that Dekel Agri-Vision currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
Plus, you should also learn about these 2 warning signs we've spotted with Dekel Agri-Vision.
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).
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.
