Borges Agricultural & Industrial Nuts, S.A.'s (BME:BAIN) Share Price Not Quite Adding Up

It's not a stretch to say that Borges Agricultural & Industrial Nuts, S.A.'s (BME:BAIN) price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" for companies in the Food industry in Spain, where the median P/S ratio is around 0.8x. 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.

View our latest analysis for Borges Agricultural & Industrial Nuts

How Borges Agricultural & Industrial Nuts Has Been Performing

For instance, Borges Agricultural & Industrial Nuts' receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Borges Agricultural & Industrial Nuts?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Borges Agricultural & Industrial Nuts' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. This means it has also seen a slide in revenue over the longer-term as revenue is down 23% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 2.8% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that Borges Agricultural & Industrial Nuts' P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does Borges Agricultural & Industrial Nuts' P/S Mean For Investors?

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.

Our look at Borges Agricultural & Industrial Nuts revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Plus, you should also learn about these 4 warning signs we've spotted with Borges Agricultural & Industrial Nuts (including 2 which shouldn't be ignored).

If you're unsure about the strength of Borges Agricultural & Industrial Nuts' 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.

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