Koenig & Bauer AG's (ETR:SKB) 25% Cheaper Price Remains In Tune With Revenues

The Koenig & Bauer AG (ETR:SKB) share price has fared very poorly over the last month, falling by a substantial 25%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 34% in that time.

In spite of the heavy fall in price, it's still not a stretch to say that Koenig & Bauer's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Machinery industry in Germany, where the median P/S ratio is around 0.5x. 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 Koenig & Bauer

What Does Koenig & Bauer's P/S Mean For Shareholders?

Koenig & Bauer could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Koenig & Bauer will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Koenig & Bauer?

The only time you'd be comfortable seeing a P/S like Koenig & Bauer's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.2%. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 5.6% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.7% each year, which is not materially different.

With this information, we can see why Koenig & Bauer is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Koenig & Bauer's P/S?

With its share price dropping off a cliff, the P/S for Koenig & Bauer looks to be in line with the rest of the Machinery industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A Koenig & Bauer's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Machinery industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

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

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com