Livetech da Bahia Indústria e Comércio S.A.'s (BVMF:WDCN3) Revenues Are Not Doing Enough For Some Investors

Livetech da Bahia Indústria e Comércio S.A.'s (BVMF:WDCN3) price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Communications industry in Brazil, where around half of the companies have P/S ratios above 1.9x and even P/S above 6x 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.

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View our latest analysis for Livetech da Bahia Indústria e Comércio

What Does Livetech da Bahia Indústria e Comércio's P/S Mean For Shareholders?

The recent revenue growth at Livetech da Bahia Indústria e Comércio would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Livetech da Bahia Indústria e Comércio will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Livetech da Bahia Indústria e Comércio?

The only time you'd be truly comfortable seeing a P/S as low as Livetech da Bahia Indústria e Comércio's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 5.7% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 18% overall drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 24% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Livetech da Bahia Indústria e Comércio's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Livetech da Bahia Indústria e Comércio confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Livetech da Bahia Indústria e Comércio has 4 warning signs (and 1 which is significant) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.