Meyer Burger Technology AG (VTX:MBTN) Might Not Be As Mispriced As It Looks After Plunging 59%

To the annoyance of some shareholders, Meyer Burger Technology AG (VTX:MBTN) shares are down a considerable 59% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 91% share price decline.

After such a large drop in price, Meyer Burger Technology's price-to-sales (or "P/S") ratio of 1.2x might make it look like a buy right now compared to the Semiconductor industry in Switzerland, where around half of the companies have P/S ratios above 2.4x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Meyer Burger Technology

What Does Meyer Burger Technology's P/S Mean For Shareholders?

Meyer Burger Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Meyer Burger Technology will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 8.3% decrease to the company's top line. Still, the latest three year period has seen an excellent 49% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 87% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 12% per annum, which is noticeably less attractive.

With this in consideration, we find it intriguing that Meyer Burger Technology's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Meyer Burger Technology's P/S

Meyer Burger Technology's recently weak share price has pulled its P/S back below other Semiconductor companies. 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.

Meyer Burger Technology's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Meyer Burger Technology, and understanding should be part of your investment process.

If you're unsure about the strength of Meyer Burger Technology'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.