Investors Give Frontier Digital Ventures Limited (ASX:FDV) Shares A 25% Hiding

Frontier Digital Ventures Limited (ASX:FDV) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 39% in that time.

Following the heavy fall in price, Frontier Digital Ventures' price-to-sales (or "P/S") ratio of 1.7x might make it look like a buy right now compared to the Interactive Media and Services industry in Australia, where around half of the companies have P/S ratios above 3.1x and even P/S above 7x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Frontier Digital Ventures

How Frontier Digital Ventures Has Been Performing

With revenue growth that's inferior to most other companies of late, Frontier Digital Ventures has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Frontier Digital Ventures' Revenue Growth Trending?

Frontier Digital Ventures' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. The latest three year period has also seen an excellent 112% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 5.2% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 2.4%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Frontier Digital Ventures' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Frontier Digital Ventures' P/S?

Frontier Digital Ventures' P/S has taken a dip along with its share price. 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.

A look at Frontier Digital Ventures' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

It is also worth noting that we have found 1 warning sign for Frontier Digital Ventures that you need to take into consideration.

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).

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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.