Investors Still Aren't Entirely Convinced By Minerva Insurance Company Public Ltd's (CSE:MINE) Revenues Despite 26% Price Jump

Minerva Insurance Company Public Ltd (CSE:MINE) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 47%.

Even after such a large jump in price, there still wouldn't be many who think Minerva Insurance Company's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Cyprus' Insurance industry is similar at about 0.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Minerva Insurance Company

How Has Minerva Insurance Company Performed Recently?

As an illustration, revenue has deteriorated at Minerva Insurance Company over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Minerva Insurance Company?

In order to justify its P/S ratio, Minerva Insurance Company would need to produce growth that's similar to 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 22%. This means it has also seen a slide in revenue over the longer-term as revenue is down 20% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for a contraction of 9.3% shows the industry is even less attractive on an annualised basis.

With this in consideration, we find it intriguing but explainable that Minerva Insurance Company's P/S matches closely with its industry peers. There's no guarantee the P/S has found a floor yet with recent revenue going backwards, despite the industry heading down even harder. It's conceivable that the P/S falls to lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

The Final Word

Its shares have lifted substantially and now Minerva Insurance Company's P/S is back within range of the industry median. 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.

We've established that Minerva Insurance Company currently trades on a slightly lower than expected P/S if you consider its recent three-year revenues aren't as bad as the forecasts for a struggling industry. The fact that the company's P/S is on par with the industry despite the fact that it outperformed it could be an indication of some unobserved threats to future revenues. Perhaps there is some hesitation about the company's ability to deviate from the industry's dismal performance and maintain a relatively smaller revenue decline. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Minerva Insurance Company you should know about.

If you're unsure about the strength of Minerva Insurance Company'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.