Some Groupe Berkem Société anonyme (EPA:ALKEM) Shareholders Look For Exit As Shares Take 26% Pounding

Groupe Berkem Société anonyme (EPA:ALKEM) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 61% share price decline.

Even after such a large drop in price, it's still not a stretch to say that Groupe Berkem Société anonyme's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Chemicals industry in France, where the median P/S ratio is around 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Groupe Berkem Société anonyme

How Has Groupe Berkem Société anonyme Performed Recently?

Recent times have been pleasing for Groupe Berkem Société anonyme as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. 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 not quite in favour.

Keen to find out how analysts think Groupe Berkem Société anonyme's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

Groupe Berkem Société anonyme'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.

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. Revenue has also lifted 25% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 9.5% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 241%, which is noticeably more attractive.

With this in mind, we find it intriguing that Groupe Berkem Société anonyme's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

Following Groupe Berkem Société anonyme's share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Given that Groupe Berkem Société anonyme's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

Plus, you should also learn about these 4 warning signs we've spotted with Groupe Berkem Société anonyme (including 2 which make us uncomfortable).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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