Some Companhia Siderúrgica Nacional (BVMF:CSNA3) Shareholders Look For Exit As Shares Take 26% Pounding

Unfortunately for some shareholders, the Companhia Siderúrgica Nacional (BVMF:CSNA3) 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 56% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think Companhia Siderúrgica Nacional's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Brazil's Metals and Mining industry is similar at about 0.5x. 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.

Check out our latest analysis for Companhia Siderúrgica Nacional

How Has Companhia Siderúrgica Nacional Performed Recently?

The recently shrinking revenue for Companhia Siderúrgica Nacional has been in line with the industry. Perhaps the market is expecting future revenue performance to continue matching the industry, which has kept the P/S in line with expectations. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. At the very least, you'd be hoping that revenue doesn't accelerate downwards if your plan is to pick up some stock while it's not in favour.

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

Is There Some Revenue Growth Forecasted For Companhia Siderúrgica Nacional?

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

Retrospectively, the last year delivered a frustrating 2.0% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 7.8% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the eleven analysts covering the company suggest revenue should grow by 2.4% each year over the next three years. With the industry predicted to deliver 5.5% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's curious that Companhia Siderúrgica Nacional's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Companhia Siderúrgica Nacional's P/S Mean For Investors?

Companhia Siderúrgica Nacional's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Given that Companhia Siderúrgica Nacional's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Companhia Siderúrgica Nacional that you should be aware of.

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.