Grupo Casas Bahia S.A.'s (BVMF:BHIA3) Share Price Is Still Matching Investor Opinion Despite 28% Slump

Unfortunately for some shareholders, the Grupo Casas Bahia S.A. (BVMF:BHIA3) share price has dived 28% 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 82% share price decline.

Even after such a large drop in price, there still wouldn't be many who think Grupo Casas Bahia's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Brazil's Specialty Retail industry is similar at about 0.4x. 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.

See our latest analysis for Grupo Casas Bahia

How Grupo Casas Bahia Has Been Performing

Recent revenue growth for Grupo Casas Bahia has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Grupo Casas Bahia.

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

In order to justify its P/S ratio, Grupo Casas Bahia would need to produce growth that's similar to the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 12% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 6.2% as estimated by the eight analysts watching the company. That's shaping up to be similar to the 6.1% growth forecast for the broader industry.

With this in mind, it makes sense that Grupo Casas Bahia's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Grupo Casas Bahia's P/S

Grupo Casas Bahia's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've seen that Grupo Casas Bahia maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Grupo Casas Bahia you should know about.

If you're unsure about the strength of Grupo Casas Bahia's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.