Risks Still Elevated At These Prices As Invibes Advertising N.V. (EPA:ALINV) Shares Dive 29%

To the annoyance of some shareholders, Invibes Advertising N.V. (EPA:ALINV) shares are down a considerable 29% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Invibes Advertising's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Media industry in France is also close to 0.5x. 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.

Check out our latest analysis for Invibes Advertising

How Has Invibes Advertising Performed Recently?

Recent times haven't been great for Invibes Advertising as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For Invibes Advertising?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Invibes Advertising's to be considered reasonable.

Retrospectively, the last year delivered a decent 4.6% gain to the company's revenues. Pleasingly, revenue has also lifted 71% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 4.0% during the coming year according to the one analyst following the company. That's not great when the rest of the industry is expected to grow by 0.8%.

In light of this, it's somewhat alarming that Invibes Advertising's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Bottom Line On Invibes Advertising's P/S

Following Invibes Advertising's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our check of Invibes Advertising's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Before you settle on your opinion, we've discovered 4 warning signs for Invibes Advertising (3 can't be ignored!) that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.