Hypoport SE's (ETR:HYQ) 26% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

Hypoport SE (ETR:HYQ) shares have had a horrible month, losing 26% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 34% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Hypoport's P/S ratio of 1.9x, since the median price-to-sales (or "P/S") ratio for the Diversified Financial industry in Germany is about the same. 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.

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View our latest analysis for Hypoport

What Does Hypoport's P/S Mean For Shareholders?

Recent revenue growth for Hypoport has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

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Is There Some Revenue Growth Forecasted For Hypoport?

Hypoport's 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 decent 14% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 26% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 14% per year over the next three years. With the industry predicted to deliver 19% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's curious that Hypoport's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

Hypoport's plummeting stock price has brought its P/S back to a similar region as the rest of the 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.

When you consider that Hypoport's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be 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. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Hypoport that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.