Benign Growth For PDG Realty S.A. Empreendimentos e Participações (BVMF:PDGR3) Underpins Stock's 84% Plummet

PDG Realty S.A. Empreendimentos e Participações (BVMF:PDGR3) shareholders that were waiting for something to happen have been dealt a blow with a 84% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 96% share price decline.

Since its price has dipped substantially, when close to half the companies operating in Brazil's Consumer Durables industry have price-to-sales ratios (or "P/S") above 0.8x, you may consider PDG Realty Empreendimentos e Participações as an enticing stock to check out with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for PDG Realty Empreendimentos e Participações

What Does PDG Realty Empreendimentos e Participações' Recent Performance Look Like?

For instance, PDG Realty Empreendimentos e Participações' receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on PDG Realty Empreendimentos e Participações will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for PDG Realty Empreendimentos e Participações, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is PDG Realty Empreendimentos e Participações' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as PDG Realty Empreendimentos e Participações' is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 21%. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 19% shows it's an unpleasant look.

With this information, we are not surprised that PDG Realty Empreendimentos e Participações is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On PDG Realty Empreendimentos e Participações' P/S

PDG Realty Empreendimentos e Participações' P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that PDG Realty Empreendimentos e Participações maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You always need to take note of risks, for example - PDG Realty Empreendimentos e Participações has 5 warning signs we think you should be aware of.

If you're unsure about the strength of PDG Realty Empreendimentos e Participações' 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.