Cliq Digital AG (ETR:CLIQ) Might Not Be As Mispriced As It Looks After Plunging 27%

Unfortunately for some shareholders, the Cliq Digital AG (ETR:CLIQ) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 72% loss during that time.

After such a large drop in price, Cliq Digital may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Software industry in Germany have P/S ratios greater than 1.8x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Cliq Digital

How Has Cliq Digital Performed Recently?

With revenue growth that's inferior to most other companies of late, Cliq Digital has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Cliq Digital.

How Is Cliq Digital's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 3.3%. The latest three year period has also seen an excellent 179% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 12% per year as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11% per year, which is not materially different.

In light of this, it's peculiar that Cliq Digital's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Cliq Digital's P/S Mean For Investors?

Cliq Digital's recently weak share price has pulled its P/S back below other Software companies. 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.

It looks to us like the P/S figures for Cliq Digital remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 2 warning signs for Cliq Digital (1 is significant!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com