There's No Escaping Christie Group plc's (LON:CTG) Muted Revenues Despite A 28% Share Price Rise
Christie Group plc (LON:CTG) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
Although its price has surged higher, given about half the companies operating in the United Kingdom's Professional Services industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Christie Group as an attractive investment 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.
Check out our latest analysis for Christie Group
What Does Christie Group's Recent Performance Look Like?
Christie Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Christie Group will help you uncover what's on the horizon.Is There Any Revenue Growth Forecasted For Christie Group?
The only time you'd be truly comfortable seeing a P/S as low as Christie Group's is when the company's growth is on track to lag the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 42%. Although, its longer-term performance hasn't been as strong with three-year revenue growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Looking ahead now, revenue is anticipated to climb by 2.2% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 6.3%, which is noticeably more attractive.
With this in consideration, its clear as to why Christie 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.
The Bottom Line On Christie Group's P/S
Christie Group's stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
As we suspected, our examination of Christie Group's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Before you settle on your opinion, we've discovered 2 warning signs for Christie Group that you should be aware of.
If these risks are making you reconsider your opinion on Christie Group, explore our interactive list of high quality stocks to get an idea of what else is out there.
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.