More Unpleasant Surprises Could Be In Store For Ânima Holding S.A.'s (BVMF:ANIM3) Shares After Tumbling 26%

Unfortunately for some shareholders, the Ânima Holding S.A. (BVMF:ANIM3) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 54% share price decline.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Ânima Holding's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Consumer Services industry in Brazil is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Ânima Holding

How Ânima Holding Has Been Performing

Recent times haven't been great for Ânima Holding as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Ânima Holding will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Ânima Holding?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 3.8% last year. The latest three year period has also seen an excellent 75% overall rise in revenue, aided somewhat by its short-term performance. 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 4.2% per annum during the coming three years according to the eleven analysts following the company. With the industry predicted to deliver 6.4% growth per year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Ânima Holding is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Ânima Holding's P/S

Ânima Holding's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

When you consider that Ânima Holding's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you take the next step, you should know about the 2 warning signs for Ânima Holding (1 can't be ignored!) that we have uncovered.

If these risks are making you reconsider your opinion on Ânima Holding, 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.