Little Excitement Around João Fortes Engenharia S.A.'s (BVMF:JFEN3) Revenues As Shares Take 41% Pounding

João Fortes Engenharia S.A. (BVMF:JFEN3) shares have had a horrible month, losing 41% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 93% share price decline.

After such a large drop in price, João Fortes Engenharia's price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Real Estate industry in Brazil, where around half of the companies have P/S ratios above 1.6x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for João Fortes Engenharia

How Has João Fortes Engenharia Performed Recently?

João Fortes Engenharia certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on João Fortes Engenharia will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on João Fortes Engenharia's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like João Fortes Engenharia's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 51% gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 7.1% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why João Fortes Engenharia's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does João Fortes Engenharia's P/S Mean For Investors?

João Fortes Engenharia's recently weak share price has pulled its P/S back below other Real Estate companies. 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.

In line with expectations, João Fortes Engenharia maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

And what about other risks? Every company has them, and we've spotted 4 warning signs for João Fortes Engenharia you should know about.

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.