Not Many Are Piling Into Brava Energia S.A. (BVMF:BRAV3) Stock Yet As It Plummets 26%

The Brava Energia S.A. (BVMF:BRAV3) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 47% share price drop.

Even after such a large drop in price, there still wouldn't be many who think Brava Energia's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in Brazil's Oil and Gas industry is similar at about 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Check out our latest analysis for Brava Energia

How Has Brava Energia Performed Recently?

Recent times have been pleasing for Brava Energia as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For Brava Energia?

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

Taking a look back first, we see that the company grew revenue by an impressive 55% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 20% per annum as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 5.4% per annum growth forecast for the broader industry.

In light of this, it's curious that Brava Energia's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Brava Energia's P/S

Following Brava Energia's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Brava Energia's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Brava Energia you should be aware of, and 1 of them shouldn't be ignored.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.