Enogia SAS' (EPA:ALENO) P/S Is Still On The Mark Following 31% Share Price Bounce

Enogia SAS (EPA:ALENO) shares have had a really impressive month, gaining 31% after a shaky period beforehand. The annual gain comes to 179% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, you could be forgiven for thinking Enogia SAS is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 2.8x, considering almost half the companies in France's Electrical industry have P/S ratios below 0.8x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Enogia SAS

What Does Enogia SAS' P/S Mean For Shareholders?

Recent times have been advantageous for Enogia SAS as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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Is There Enough Revenue Growth Forecasted For Enogia SAS?

Enogia SAS' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 39%. The strong recent performance means it was also able to grow revenue by 164% 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 year should generate growth of 19% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 5.3% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Enogia SAS' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Shares in Enogia SAS have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Enogia SAS maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electrical industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Enogia SAS that you should be aware of.

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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.