Shape Robotics A/S (CPH:SHAPE) Stock's 36% Dive Might Signal An Opportunity But It Requires Some Scrutiny

The Shape Robotics A/S (CPH:SHAPE) share price has fared very poorly over the last month, falling by a substantial 36%. For any long-term shareholders, the last month ends a year to forget by locking in a 73% share price decline.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Shape Robotics' P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Consumer Services industry in Denmark is also close to 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 3 warning signs about Shape Robotics. View them for free.

Check out our latest analysis for Shape Robotics

How Has Shape Robotics Performed Recently?

Shape Robotics certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Shape Robotics will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Shape Robotics, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 76% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 4.9% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Shape Robotics' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Shape Robotics' P/S?

With its share price dropping off a cliff, the P/S for Shape Robotics looks to be in line with the rest of the Consumer 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.

We've established that Shape Robotics currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Shape Robotics (1 is a bit concerning!) that you should be aware of before investing here.

If you're unsure about the strength of Shape Robotics' 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.