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華爾街日報Syensqo SA/NV (EBR:SYENS) Investors Are Less Pessimistic Than Expected
It's not a stretch to say that Syensqo SA/NV's (EBR:SYENS) price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" for companies in the Chemicals industry in Belgium, where the median P/S ratio is around 0.8x. 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.
View our latest analysis for Syensqo
What Does Syensqo's P/S Mean For Shareholders?
Syensqo's negative revenue growth of late has neither been better nor worse than most other companies. Perhaps the market is expecting future revenue performance to continue matching the industry, which has kept the P/S in line with expectations. You'd much rather the company improve its revenue if you still believe in the business. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Syensqo.How Is Syensqo's Revenue Growth Trending?
Syensqo's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.6%. The last three years don't look nice either as the company has shrunk revenue by 20% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 0.5% each year over the next three years. With the industry predicted to deliver 2.6% growth per annum, the company is positioned for a weaker revenue result.
In light of this, it's curious that Syensqo's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.
What Does Syensqo's P/S Mean For Investors?
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.
Given that Syensqo's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Having said that, be aware Syensqo is showing 1 warning sign in our investment analysis, you should know about.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.