voxeljet AG's (NASDAQ:VJET) Business And Shares Still Trailing The Industry
When you see that almost half of the companies in the Machinery industry in the United States have price-to-sales ratios (or "P/S") above 1.4x, voxeljet AG (NASDAQ:VJET) looks to be giving off some buy signals with its 0.5x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for voxeljet
What Does voxeljet's P/S Mean For Shareholders?
voxeljet could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on voxeljet will help you uncover what's on the horizon.
How Is voxeljet's Revenue Growth Trending?
There's an inherent assumption that a company should underperform the industry for P/S ratios like voxeljet's to be considered reasonable.
If we review the last year of revenue growth, the company posted a worthy increase of 15%. The latest three year period has also seen a 27% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.
Looking ahead now, revenue is anticipated to slump, contracting by 3.1% during the coming year according to the lone analyst following the company. With the industry predicted to deliver 8.8% growth, that's a disappointing outcome.
With this information, we are not surprised that voxeljet is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
The Final Word
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
With revenue forecasts that are inferior to the rest of the industry, it's no surprise that voxeljet's P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
You should always think about risks. Case in point, we've spotted 4 warning signs for voxeljet you should be aware of, and 2 of them are 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).
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.
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