Slammed 26% Balyo SA (EPA:BALYO) Screens Well Here But There Might Be A Catch

The Balyo SA (EPA:BALYO) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 50% share price drop.

Even after such a large drop in price, it's still not a stretch to say that Balyo's price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Machinery industry in France, where the median P/S ratio is around 1.1x. 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.

See our latest analysis for Balyo

How Has Balyo Performed Recently?

Recent times haven't been great for Balyo as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Balyo will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

Balyo'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 decent 11% gain to the company's revenues. The latest three year period has also seen a 18% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 21% over the next year. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.

In light of this, it's curious that Balyo's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Balyo's P/S

Balyo'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.

We've established that Balyo currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 4 warning signs for Balyo (2 are potentially serious!) that you need to take into consideration.

If you're unsure about the strength of Balyo's 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.