Slammed 31% Beonic Limited (ASX:BEO) Screens Well Here But There Might Be A Catch

The Beonic Limited (ASX:BEO) share price has fared very poorly over the last month, falling by a substantial 31%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 55% loss during that time.

Since its price has dipped substantially, Beonic's price-to-sales (or "P/S") ratio of 0.4x might make it look like a strong buy right now compared to the wider Software industry in Australia, where around half of the companies have P/S ratios above 2.6x and even P/S above 6x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beonic

How Beonic Has Been Performing

The recent revenue growth at Beonic would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Beonic will help you shine a light on its historical performance.

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

Beonic's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. This was backed up an excellent period prior to see revenue up by 74% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 22% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Beonic's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On Beonic's P/S

Beonic's P/S looks about as weak as its stock price lately. 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.

Our examination of Beonic revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent

It is also worth noting that we have found 3 warning signs for Beonic that you need to take into consideration.

If you're unsure about the strength of Beonic's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com