Slammed 31% Movida Participações S.A. (BVMF:MOVI3) Screens Well Here But There Might Be A Catch

Unfortunately for some shareholders, the Movida Participações S.A. (BVMF:MOVI3) share price has dived 31% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 63% loss during that time.

Since its price has dipped substantially, given about half the companies operating in Brazil's Transportation industry have price-to-sales ratios (or "P/S") above 1x, you may consider Movida Participações as an attractive investment with its 0.1x 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.

View our latest analysis for Movida Participações

How Movida Participações Has Been Performing

Movida Participações could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Movida Participações' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 21%. The latest three year period has also seen an excellent 178% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 15% each year over the next three years. That's shaping up to be materially higher than the 13% per year growth forecast for the broader industry.

With this information, we find it odd that Movida Participações is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Movida Participações' P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Movida Participações' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You always need to take note of risks, for example - Movida Participações has 3 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Movida Participações, 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.