Syn Prop & Tech S.A. (BVMF:SYNE3) Looks Inexpensive After Falling 42% But Perhaps Not Attractive Enough

Syn Prop & Tech S.A. (BVMF:SYNE3) shareholders that were waiting for something to happen have been dealt a blow with a 42% share price drop in the last month. The last month has meant the stock is now only up 8.0% during the last year.

Since its price has dipped substantially, Syn Prop & Tech may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Real Estate industry in Brazil have P/S ratios greater than 1.4x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Syn Prop & Tech

What Does Syn Prop & Tech's Recent Performance Look Like?

Syn Prop & Tech certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Syn Prop & Tech will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Syn Prop & Tech's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 233% gain to the company's top line. The latest three year period has also seen an excellent 187% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue growth is heading into negative territory, declining 81% over the next year. That's not great when the rest of the industry is expected to grow by 8.1%.

With this information, we are not surprised that Syn Prop & Tech is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Syn Prop & Tech's P/S

Syn Prop & Tech's recently weak share price has pulled its P/S back below other Real Estate companies. 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.

It's clear to see that Syn Prop & Tech maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Syn Prop & Tech's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Syn Prop & Tech (at least 2 which don't sit too well with us), and understanding them should be part of your investment process.

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.