Investors Give Harboes Bryggeri A/S (CPH:HARB B) Shares A 30% Hiding

The Harboes Bryggeri A/S (CPH:HARB B) share price has fared very poorly over the last month, falling by a substantial 30%. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 145% in the last twelve months.

Since its price has dipped substantially, it would be understandable if you think Harboes Bryggeri is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in Denmark's Beverage industry have P/S ratios above 1.4x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Harboes Bryggeri

How Harboes Bryggeri Has Been Performing

The revenue growth achieved at Harboes Bryggeri over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Harboes Bryggeri will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Harboes Bryggeri will help you shine a light on its historical performance.

How Is Harboes Bryggeri's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 8.4% last year. This was backed up an excellent period prior to see revenue up by 34% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 3.7% shows it's noticeably more attractive.

With this information, we find it odd that Harboes Bryggeri is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

The southerly movements of Harboes Bryggeri's shares means its P/S is now sitting at a pretty low level. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Harboes Bryggeri revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Before you take the next step, you should know about the 2 warning signs for Harboes Bryggeri that we have uncovered.

If these risks are making you reconsider your opinion on Harboes Bryggeri, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.