Companhia Brasileira De Distribuicao (BVMF:PCAR3) Stock Rockets 65% As Investors Are Less Pessimistic Than Expected

Simply Wall St · 04/15 09:04

Companhia Brasileira De Distribuicao (BVMF:PCAR3) shares have had a really impressive month, gaining 65% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 61%.

Even after such a large jump in price, there still wouldn't be many who think Companhia Brasileira De Distribuicao's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Brazil's Consumer Retailing industry is similar at about 0.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Companhia Brasileira De Distribuicao

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BOVESPA:PCAR3 Price to Sales Ratio vs Industry April 15th 2025

How Has Companhia Brasileira De Distribuicao Performed Recently?

Companhia Brasileira De Distribuicao could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Companhia Brasileira De Distribuicao.

Do Revenue Forecasts Match The P/S Ratio?

Companhia Brasileira De Distribuicao'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.

If we review the last year of revenue growth, the company posted a worthy increase of 5.6%. The latest three year period has also seen a 15% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 7.4% per annum over the next three years. That's shaping up to be materially lower than the 12% per annum growth forecast for the broader industry.

With this in mind, we find it intriguing that Companhia Brasileira De Distribuicao's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

Companhia Brasileira De Distribuicao's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

When you consider that Companhia Brasileira De Distribuicao's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You need to take note of risks, for example - Companhia Brasileira De Distribuicao has 2 warning signs (and 1 which is a bit unpleasant) we think 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).