Thruvision Group plc (LON:THRU) Shares Slammed 32% But Getting In Cheap Might Be Difficult Regardless

Simply Wall St · 10/15 05:03

Thruvision Group plc (LON:THRU) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 50% share price decline.

Even after such a large drop in price, given close to half the companies operating in the United Kingdom's Electronic industry have price-to-sales ratios (or "P/S") below 1.3x, you may still consider Thruvision Group as a stock to potentially avoid with its 2.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Thruvision Group

ps-multiple-vs-industry
AIM:THRU Price to Sales Ratio vs Industry October 15th 2024

What Does Thruvision Group's P/S Mean For Shareholders?

Thruvision Group 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 the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Thruvision Group.

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

Thruvision Group's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered a frustrating 37% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 17% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 23% per year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.1% each year, which is noticeably less attractive.

With this information, we can see why Thruvision Group is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Despite the recent share price weakness, Thruvision Group's P/S remains higher than most other companies in the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Thruvision Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Thruvision Group that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).