The Market Doesn't Like What It Sees From SAS Florentaise's (EPA:ALFLO) Revenues Yet As Shares Tumble 64%

SAS Florentaise (EPA:ALFLO) shareholders that were waiting for something to happen have been dealt a blow with a 64% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 85% loss during that time.

Following the heavy fall in price, SAS Florentaise may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Chemicals industry in France have P/S ratios greater than 1.7x and even P/S higher than 28x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for SAS Florentaise

What Does SAS Florentaise's Recent Performance Look Like?

Revenue has risen firmly for SAS Florentaise recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

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

In order to justify its P/S ratio, SAS Florentaise would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. As a result, it also grew revenue by 17% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 8.9% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why SAS Florentaise is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

SAS Florentaise's P/S has taken a dip along with its share price. 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 SAS Florentaise confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 4 warning signs for SAS Florentaise that you need to be mindful of.

If you're unsure about the strength of SAS Florentaise'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.