Multilaser Industrial S.A. (BVMF:MLAS3) Might Not Be As Mispriced As It Looks

When you see that almost half of the companies in the Tech industry in Brazil have price-to-sales ratios (or "P/S") above 1.3x, Multilaser Industrial S.A. (BVMF:MLAS3) looks to be giving off some buy signals with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Multilaser Industrial

How Multilaser Industrial Has Been Performing

Multilaser Industrial could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Multilaser Industrial's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Multilaser Industrial's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 17%. The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 9.4% per year as estimated by the three analysts watching the company. That's shaping up to be similar to the 9.7% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Multilaser Industrial's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

We've seen that Multilaser Industrial currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Multilaser Industrial you should be aware of.

If these risks are making you reconsider your opinion on Multilaser Industrial, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.