Why Investors Shouldn't Be Surprised By aifinyo AG's (ETR:EBEN) 25% Share Price Plunge

Unfortunately for some shareholders, the aifinyo AG (ETR:EBEN) share price has dived 25% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 70% loss during that time.

Although its price has dipped substantially, aifinyo may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Diversified Financial industry in Germany have P/S ratios greater than 1.8x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for aifinyo

How aifinyo Has Been Performing

aifinyo has been doing a reasonable job lately as its revenue hasn't declined as much as most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. You'd much rather the company continue improving its revenue if you still believe in the business. In saying that, existing shareholders probably aren't pessimistic about the share price if the company's revenue continues outplaying the industry.

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

Is There Any Revenue Growth Forecasted For aifinyo?

There's an inherent assumption that a company should underperform the industry for P/S ratios like aifinyo's to be considered reasonable.

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 4.0%. Still, the latest three year period has seen an excellent 70% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 11% each year over the next three years. With the industry predicted to deliver 14% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why aifinyo's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The southerly movements of aifinyo's shares means its P/S is now sitting at a pretty low level. 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.

We've established that aifinyo maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 5 warning signs for aifinyo (2 are concerning!) that you should be aware of.

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