SBF AG (FRA:CY1K) Might Not Be As Mispriced As It Looks After Plunging 25%

SBF AG (FRA:CY1K) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about SBF's P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Electrical industry in Germany is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for SBF

What Does SBF's Recent Performance Look Like?

SBF could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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 SBF.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 63% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Turning to the outlook, the next three years should generate growth of 19% each year as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.5% each year, which is noticeably less attractive.

In light of this, it's curious that SBF's 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 Final Word

Following SBF's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that SBF currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with SBF.

If you're unsure about the strength of SBF'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.