Aeris Indústria e Comércio de Equipamentos para Geração de Energia S.A. (BVMF:AERI3) Looks Inexpensive After Falling 47% But Perhaps Not Attractive Enough

The Aeris Indústria e Comércio de Equipamentos para Geração de Energia S.A. (BVMF:AERI3) share price has softened a substantial 47% over the previous 30 days, handing back much of the gains the stock has made lately. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.

Following the heavy fall in price, Aeris Indústria e Comércio de Equipamentos para Geração de Energia may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Electrical industry in Brazil have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Aeris Indústria e Comércio de Equipamentos para Geração de Energia

What Does Aeris Indústria e Comércio de Equipamentos para Geração de Energia's Recent Performance Look Like?

Aeris Indústria e Comércio de Equipamentos para Geração de Energia hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Aeris Indústria e Comércio de Equipamentos para Geração de Energia's future stacks up against the industry? In that case, our free report is a great place to start.

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

In order to justify its P/S ratio, Aeris Indústria e Comércio de Equipamentos para Geração de Energia would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 28% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 16% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue growth is heading into negative territory, declining 15% over the next year. With the industry predicted to deliver 17% growth, that's a disappointing outcome.

With this in consideration, we find it intriguing that Aeris Indústria e Comércio de Equipamentos para Geração de Energia's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does Aeris Indústria e Comércio de Equipamentos para Geração de Energia's P/S Mean For Investors?

The southerly movements of Aeris Indústria e Comércio de Equipamentos para Geração de Energia's shares means its P/S is now sitting at a pretty low level. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Aeris Indústria e Comércio de Equipamentos para Geração de Energia's P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Aeris Indústria e Comércio de Equipamentos para Geração de Energia has 4 warning signs (and 3 which don't sit too well with us) we think you should know about.

If you're unsure about the strength of Aeris Indústria e Comércio de Equipamentos para Geração de Energia's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.