Colliers International Group Inc.'s (TSE:CIGI) Revenues Are Not Doing Enough For Some Investors
With a price-to-sales (or "P/S") ratio of 1.3x Colliers International Group Inc. (TSE:CIGI) may be sending bullish signals at the moment, given that almost half of all the Real Estate companies in Canada have P/S ratios greater than 2.4x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Colliers International Group
How Has Colliers International Group Performed Recently?
While the industry has experienced revenue growth lately, Colliers International Group's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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 Colliers International Group'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 Low P/S?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Colliers International Group's to be considered reasonable.
Retrospectively, the last year delivered a frustrating 5.7% decrease to the company's top line. Still, the latest three year period has seen an excellent 54% overall rise in revenue, in spite of its unsatisfying short-term performance. 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 three years should generate growth of 4.8% per annum as estimated by the nine analysts watching the company. With the industry predicted to deliver 10% growth per year, the company is positioned for a weaker revenue result.
With this in consideration, its clear as to why Colliers International Group's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What We Can Learn From Colliers International Group'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 Colliers International Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.
You should always think about risks. Case in point, we've spotted 5 warning signs for Colliers International Group you should be aware of, and 1 of them is concerning.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
