Some Confidence Is Lacking In TAKKT AG (ETR:TTK) As Shares Slide 25%

Explore TAKKT's Fair Values from the Community and select yours

Unfortunately for some shareholders, the TAKKT AG (ETR:TTK) share price has dived 25% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Even after such a large drop in price, there still wouldn't be many who think TAKKT's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in Germany's Commercial Services industry. 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.

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View our latest analysis for TAKKT

What Does TAKKT's Recent Performance Look Like?

TAKKT 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think TAKKT's future stacks up against the industry? In that case, our free report is a great place to start.

How Is TAKKT's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 10% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 21% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 2.2% per year as estimated by the three analysts watching the company. With the industry predicted to deliver 4.5% growth per annum, the company is positioned for a weaker revenue result.

With this information, we find it interesting that TAKKT is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does TAKKT's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for TAKKT looks to be in line with the rest of the Commercial Services industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Given that TAKKT's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

You should always think about risks. Case in point, we've spotted 1 warning sign for TAKKT you should be aware of.

If these risks are making you reconsider your opinion on TAKKT, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.