Dekel Agri-Vision plc (LON:DKL) Might Not Be As Mispriced As It Looks

There wouldn't be many who think Dekel Agri-Vision plc's (LON:DKL) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Food industry in the United Kingdom is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

See our latest analysis for Dekel Agri-Vision

How Has Dekel Agri-Vision Performed Recently?

Dekel Agri-Vision could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dekel Agri-Vision.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Dekel Agri-Vision's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 4.1% decrease to the company's top line. As a result, revenue from three years ago have also fallen 2.0% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 23% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 2.4%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Dekel Agri-Vision's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Dekel Agri-Vision's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, Dekel Agri-Vision's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Dekel Agri-Vision (2 can't be ignored!) that you should be aware of before investing here.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.