Little Excitement Around Highlight Event and Entertainment AG's (VTX:HLEE) Revenues As Shares Take 40% Pounding

Highlight Event and Entertainment AG (VTX:HLEE) shareholders that were waiting for something to happen have been dealt a blow with a 40% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Since its price has dipped substantially, Highlight Event and Entertainment may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Entertainment industry in Switzerland have P/S ratios greater than 1.5x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Highlight Event and Entertainment

What Does Highlight Event and Entertainment's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Highlight Event and Entertainment over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on Highlight Event and Entertainment will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Highlight Event and Entertainment, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Highlight Event and Entertainment?

The only time you'd be truly comfortable seeing a P/S as low as Highlight Event and Entertainment'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 4.4%. The last three years don't look nice either as the company has shrunk revenue by 11% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 6.8% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Highlight Event and Entertainment'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 Key Takeaway

Highlight Event and Entertainment's recently weak share price has pulled its P/S back below other Entertainment companies. 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.

It's no surprise that Highlight Event and Entertainment maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Before you settle on your opinion, we've discovered 4 warning signs for Highlight Event and Entertainment (2 are concerning!) that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.