Infracommerce CXaaS S.A. (BVMF:IFCM3) Might Not Be As Mispriced As It Looks After Plunging 44%

To the annoyance of some shareholders, Infracommerce CXaaS S.A. (BVMF:IFCM3) shares are down a considerable 44% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 96% share price decline.

Following the heavy fall in price, Infracommerce CXaaS may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Professional Services industry in Brazil have P/S ratios greater than 1.3x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Infracommerce CXaaS

How Infracommerce CXaaS Has Been Performing

While the industry has experienced revenue growth lately, Infracommerce CXaaS' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still 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.

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

Is There Any Revenue Growth Forecasted For Infracommerce CXaaS?

Infracommerce CXaaS' 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 a frustrating 16% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 6.3% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 104% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.0%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Infracommerce CXaaS' 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.

The Bottom Line On Infracommerce CXaaS' P/S

The southerly movements of Infracommerce CXaaS' shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To us, it seems Infracommerce CXaaS currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. 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.

There are also other vital risk factors to consider and we've discovered 6 warning signs for Infracommerce CXaaS (5 are significant!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.