Billington Holdings Plc (LON:BILN) Screens Well But There Might Be A Catch
There wouldn't be many who think Billington Holdings Plc's (LON:BILN) price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S for the Construction industry in the United Kingdom is similar at about 0.2x. 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.
Check out our latest analysis for Billington Holdings
How Has Billington Holdings Performed Recently?
Recent times haven't been great for Billington Holdings as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Billington Holdings.
Is There Some Revenue Growth Forecasted For Billington Holdings?
In order to justify its P/S ratio, Billington Holdings would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a decent 10% gain to the company's revenues. Revenue has also lifted 7.1% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.
Turning to the outlook, the next year should generate growth of 19% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 7.6%, the company is positioned for a stronger revenue result.
In light of this, it's curious that Billington Holdings' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Billington Holdings currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
Having said that, be aware Billington Holdings is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
