Market Might Still Lack Some Conviction On SBF AG (FRA:CY1K) Even After 37% Share Price Boost

SBF AG (FRA:CY1K) shares have continued their recent momentum with a 37% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about SBF’s P/S ratio of 1.1x, since the median price-to-sales (or “P/S”) ratio for the Electrical industry in Germany is also close to 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for SBF

What Does SBF’s Recent Performance Look Like?

With revenue growth that’s superior to most other companies of late, SBF has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you’d like to see what analysts are forecasting going forward, you should check out our free report on SBF.

Is There Some Revenue Growth Forecasted For SBF?

The only time you’d be comfortable seeing a P/S like SBF’s is when the company’s growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 18% gain to the company’s top line. The strong recent performance means it was also able to grow revenue by 50% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the two analysts watching the company. With the industry only predicted to deliver 9.3% per year, the company is positioned for a stronger revenue result.

In light of this, it’s curious that SBF’s P/S sits in line with the majority of other companies. It may be that most investors aren’t convinced the company can achieve future growth expectations.

The Bottom Line On SBF’s P/S

SBF’s stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at SBF’s analyst forecasts revealed that its superior revenue outlook isn’t giving the boost to its P/S that we would’ve expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we’ve discovered 2 warning signs for SBF (1 makes us a bit uncomfortable!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.