Take Care Before Jumping Onto Crescent NV (EBR:OPTI) Even Though It's 29% Cheaper

The Crescent NV (EBR:OPTI) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.

Even after such a large drop in price, there still wouldn't be many who think Crescent's price-to-sales (or "P/S") ratio of 1.3x is worth a mention when it essentially matches the median P/S in Belgium's Communications industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for Crescent

How Crescent Has Been Performing

Crescent certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Crescent's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Crescent?

In order to justify its P/S ratio, Crescent would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 31% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 2.2%, which is noticeably less attractive.

With this information, we find it interesting that Crescent is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Crescent's P/S Mean For Investors?

Following Crescent's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Crescent currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Crescent (3 don't sit too well with us) you should be aware of.

If these risks are making you reconsider your opinion on Crescent, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.