Singulus Technologies AG (ETR:SNG) Might Not Be As Mispriced As It Looks After Plunging 25%

The Singulus Technologies AG (ETR:SNG) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

Although its price has dipped substantially, it's still not a stretch to say that Singulus Technologies' price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Machinery industry in Germany, where the median P/S ratio is around 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Singulus Technologies

What Does Singulus Technologies' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Singulus Technologies' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Singulus Technologies' Revenue Growth Trending?

Singulus Technologies' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. Even so, admirably revenue has lifted 146% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 30% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 4.4% each year, which is noticeably less attractive.

In light of this, it's curious that Singulus Technologies' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Singulus Technologies looks to be in line with the rest of the Machinery industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, Singulus Technologies' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Plus, you should also learn about these 4 warning signs we've spotted with Singulus Technologies (including 2 which are potentially serious).

If you're unsure about the strength of Singulus Technologies' 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.

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