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华尔街日报The Agency Group Australia Limited (ASX:AU1) Soars 38% But It's A Story Of Risk Vs Reward
The Agency Group Australia Limited (ASX:AU1) shareholders have had their patience rewarded with a 38% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 83% in the last year.
In spite of the firm bounce in price, Agency Group Australia's price-to-sales (or "P/S") ratio of 0.1x might still make it look like a buy right now compared to the Real Estate industry in Australia, where around half of the companies have P/S ratios above 2x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for Agency Group Australia
What Does Agency Group Australia's P/S Mean For Shareholders?
Revenue has risen firmly for Agency Group Australia recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Although there are no analyst estimates available for Agency Group Australia, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, Agency Group Australia would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Pleasingly, revenue has also lifted 36% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's about the same on an annualised basis.
With this information, we find it odd that Agency Group Australia is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.
The Key Takeaway
Agency Group Australia'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.
The fact that Agency Group Australia currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent
Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Agency Group Australia (2 are significant) you should be aware of.
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.
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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.