aap Implantate AG (ETR:AAQ1) Could Be Riskier Than It Looks
When you see that almost half of the companies in the Medical Equipment industry in Germany have price-to-sales ratios (or "P/S") above 2.9x, aap Implantate AG (ETR:AAQ1) looks to be giving off some buy signals with its 0.9x 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.
Check out our latest analysis for aap Implantate
What Does aap Implantate's P/S Mean For Shareholders?
aap Implantate 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 P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Keen to find out how analysts think aap Implantate's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Revenue Growth Forecasted For aap Implantate?
The only time you'd be truly comfortable seeing a P/S as low as aap Implantate's is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered a frustrating 5.2% decrease to the company's top line. As a result, revenue from three years ago have also fallen 10% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 6.2% per year growth forecast for the broader industry.
With this information, we find it odd that aap Implantate is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
What Does aap Implantate's P/S Mean For Investors?
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.
aap Implantate's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
Plus, you should also learn about these 5 warning signs we've spotted with aap Implantate (including 3 which are a bit unpleasant).
If these risks are making you reconsider your opinion on aap Implantate, 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.
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