More Unpleasant Surprises Could Be In Store For SMCP S.A.'s (EPA:SMCP) Shares After Tumbling 27%

The SMCP S.A. (EPA:SMCP) share price has fared very poorly over the last month, falling by a substantial 27%. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 19%.

In spite of the heavy fall in price, there still wouldn't be many who think SMCP's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when it essentially matches the median P/S in France's Specialty Retail industry. 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.

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Check out our latest analysis for SMCP

How Has SMCP Performed Recently?

SMCP could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think SMCP'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?

In order to justify its P/S ratio, SMCP would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 1.5% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 17% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue growth is heading into negative territory, declining 0.03% over the next year. Meanwhile, the broader industry is forecast to expand by 8.4%, which paints a poor picture.

With this information, we find it concerning that SMCP is trading at a fairly similar P/S compared to the industry. 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 SMCP's P/S

With its share price dropping off a cliff, the P/S for SMCP looks to be in line with the rest of the Specialty Retail 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.

Our check of SMCP's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

And what about other risks? Every company has them, and we've spotted 1 warning sign for SMCP you should know about.

If these risks are making you reconsider your opinion on SMCP, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.