Infracommerce CXaaS S.A. (BVMF:IFCM3) Stock's 29% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Unfortunately for some shareholders, the Infracommerce CXaaS S.A. (BVMF:IFCM3) share price has dived 29% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 50% share price drop.

After such a large drop in price, Infracommerce CXaaS may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Professional Services industry in Brazil have P/S ratios greater than 1.4x and even P/S higher than 4x aren't out of the ordinary. 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 Infracommerce CXaaS

How Has Infracommerce CXaaS Performed Recently?

Infracommerce CXaaS certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 analyst estimates for the company? Then our free report on Infracommerce CXaaS will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Infracommerce CXaaS' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 20%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 6.7% per year growth forecast for the broader industry.

With this information, we find it odd that Infracommerce CXaaS is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Infracommerce CXaaS' P/S?

Infracommerce CXaaS' recently weak share price has pulled its P/S back below other Professional Services companies. 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for Infracommerce CXaaS you should be aware of.

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.