MPM Corpóreos S.A. (BVMF:ESPA3) Looks Just Right With A 27% Price Jump

MPM Corpóreos S.A. (BVMF:ESPA3) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

Even after such a large jump in price, there still wouldn't be many who think MPM Corpóreos' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Brazil's Consumer Services industry is similar at about 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for MPM Corpóreos

How Has MPM Corpóreos Performed Recently?

Recent times haven't been great for MPM Corpóreos as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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How Is MPM Corpóreos' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like MPM Corpóreos' to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 47% in total over the last three years. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Turning to the outlook, the next year should generate growth of 5.9% as estimated by the lone analyst watching the company. That's shaping up to be similar to the 7.5% growth forecast for the broader industry.

With this in mind, it makes sense that MPM Corpóreos' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

MPM Corpóreos appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A MPM Corpóreos' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Consumer Services industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You should always think about risks. Case in point, we've spotted 3 warning signs for MPM Corpóreos you should be aware of, and 1 of them is significant.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.