Market Cool On Cerinnov Group SA's (EPA:ALPCV) Revenues Pushing Shares 47% Lower

The Cerinnov Group SA (EPA:ALPCV) share price has fared very poorly over the last month, falling by a substantial 47%. For any long-term shareholders, the last month ends a year to forget by locking in a 64% share price decline.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Cerinnov Group's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in France is also close to 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Cerinnov Group

How Cerinnov Group Has Been Performing

For instance, Cerinnov Group's 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Cerinnov Group's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Cerinnov Group?

The only time you'd be comfortable seeing a P/S like Cerinnov Group's is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. Regardless, revenue has managed to lift by a handy 22% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 4.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Cerinnov Group is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Cerinnov Group's P/S?

With its share price dropping off a cliff, the P/S for Cerinnov Group looks to be in line with the rest of the Machinery industry. 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.

We've established that Cerinnov Group 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. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Cerinnov Group you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.