Yahoo Finance OnTheMarket plc's (LON:OTMP) Earnings Haven't Escaped The Attention Of Investors
With a median price-to-sales (or "P/S") ratio of close to 1.6x in the Interactive Media and Services industry in the United Kingdom, you could be forgiven for feeling indifferent about OnTheMarket plc's (LON:OTMP) P/S ratio of 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for OnTheMarket
What Does OnTheMarket's P/S Mean For Shareholders?
OnTheMarket could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Keen to find out how analysts think OnTheMarket's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The P/S?
The only time you'd be comfortable seeing a P/S like OnTheMarket's is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a decent 14% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 83% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 11% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 9.0% per year, which is not materially different.
In light of this, it's understandable that OnTheMarket's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.
The Key Takeaway
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.
Our look at OnTheMarket's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.
There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for OnTheMarket that you should be aware of.
If you're unsure about the strength of OnTheMarket's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
