Yahoo Finance Aegis Brands Inc.'s (TSE:AEG) Revenues Are Not Doing Enough For Some Investors
With a price-to-sales (or "P/S") ratio of 0.7x Aegis Brands Inc. (TSE:AEG) may be sending bullish signals at the moment, given that almost half of all the Hospitality companies in Canada have P/S ratios greater than 1.7x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for Aegis Brands
What Does Aegis Brands' Recent Performance Look Like?
Recent times have been quite advantageous for Aegis Brands as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on Aegis Brands will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Aegis Brands' earnings, revenue and cash flow.
Is There Any Revenue Growth Forecasted For Aegis Brands?
Aegis Brands' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 142%. Although, its longer-term performance hasn't been as strong with three-year revenue growth being relatively non-existent overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.
Comparing that to the industry, which is predicted to deliver 158% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.
In light of this, it's understandable that Aegis Brands' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
The Bottom Line On Aegis Brands' 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.
In line with expectations, Aegis Brands maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Before you take the next step, you should know about the 5 warning signs for Aegis Brands (3 can't be ignored!) that we have uncovered.
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.
