Market Cool On Verbio SE's (ETR:VBK) Revenues Pushing Shares 35% Lower

Verbio SE (ETR:VBK) shareholders that were waiting for something to happen have been dealt a blow with a 35% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Even after such a large drop in price, Verbio's price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Oil and Gas industry in Germany, where around half of the companies have P/S ratios above 1.2x and even P/S above 229x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Verbio

How Verbio Has Been Performing

With only a limited decrease in revenue compared to most other companies of late, Verbio has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. 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 Verbio will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Verbio?

The only time you'd be truly comfortable seeing a P/S as low as Verbio's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 16%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 62% in total over the last three years. 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.

Looking ahead now, revenue is anticipated to climb by 7.4% per year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 7.9% per annum, which is not materially different.

With this in consideration, we find it intriguing that Verbio's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Verbio's P/S?

Verbio's recently weak share price has pulled its P/S back below other Oil and Gas companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Verbio currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Verbio you should be aware of.

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