Yahoo Finance Many Still Looking Away From INTERSHOP Communications Aktiengesellschaft (ETR:ISHA)
When close to half the companies operating in the Software industry in Germany have price-to-sales ratios (or "P/S") above 2.2x, you may consider INTERSHOP Communications Aktiengesellschaft (ETR:ISHA) as an attractive investment with its 1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
View our latest analysis for INTERSHOP Communications
How Has INTERSHOP Communications Performed Recently?
Recent times haven't been great for INTERSHOP Communications as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.
Keen to find out how analysts think INTERSHOP Communications' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Revenue Growth Forecasted For INTERSHOP Communications?
In order to justify its P/S ratio, INTERSHOP Communications would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered a decent 2.9% gain to the company's revenues. Revenue has also lifted 21% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.
Turning to the outlook, the next three years should generate growth of 8.5% per year as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.1% per year, which is not materially different.
In light of this, it's peculiar that INTERSHOP Communications' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Key Takeaway
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Our examination of INTERSHOP Communications' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.
We don't want to rain on the parade too much, but we did also find 2 warning signs for INTERSHOP Communications that you need to be mindful of.
If you're unsure about the strength of INTERSHOP Communications' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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.
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