WEBULL

Pinning Down Heidelberger Druckmaschinen Aktiengesellschaft's (ETR:HDD) P/S Is Difficult Right Now

Simply Wall St · 07/18 04:33

It's not a stretch to say that Heidelberger Druckmaschinen Aktiengesellschaft's (ETR:HDD) price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" for companies in the Machinery industry in Germany, where the median P/S ratio is around 0.7x. 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Check out our latest analysis for Heidelberger Druckmaschinen

ps-multiple-vs-industry
XTRA:HDD Price to Sales Ratio vs Industry July 18th 2025

How Has Heidelberger Druckmaschinen Performed Recently?

With revenue that's retreating more than the industry's average of late, Heidelberger Druckmaschinen has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

Want the full picture on analyst estimates for the company? Then our free report on Heidelberger Druckmaschinen will help you uncover what's on the horizon.

How Is Heidelberger Druckmaschinen's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Heidelberger Druckmaschinen's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 4.6% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 5.0% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 3.3% per annum over the next three years. With the industry predicted to deliver 34% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's curious that Heidelberger Druckmaschinen's P/S sits in line with the majority of other companies. 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

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.

Given that Heidelberger Druckmaschinen's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Heidelberger Druckmaschinen, and understanding these should be part of your investment process.

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.