Investors Give Exel Composites Oyj (HEL:EXL1V) Shares A 26% Hiding

Unfortunately for some shareholders, the Exel Composites Oyj (HEL:EXL1V) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 92% share price decline.

Even after such a large drop in price, it's still not a stretch to say that Exel Composites Oyj's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Machinery industry in Finland, where the median P/S ratio is around 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Exel Composites Oyj

What Does Exel Composites Oyj's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Exel Composites Oyj's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

Exel Composites Oyj's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 31% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 18% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 12% per year over the next three years. That's shaping up to be materially higher than the 5.4% per annum growth forecast for the broader industry.

With this information, we find it interesting that Exel Composites Oyj is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Exel Composites Oyj's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, Exel Composites Oyj's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 4 warning signs for Exel Composites Oyj (3 are potentially serious!) that we have uncovered.

If these risks are making you reconsider your opinion on Exel Composites Oyj, 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.

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