Not Many Are Piling Into The Blockchain Group (EPA:ALTBG) Stock Yet As It Plummets 36%

The Blockchain Group (EPA:ALTBG) shares have retraced a considerable 36% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 265%.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Blockchain Group's P/S ratio of 1.8x, since the median price-to-sales (or "P/S") ratio for the Software industry in France is also close to 2.2x. 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 Blockchain Group

How Has Blockchain Group Performed Recently?

As an illustration, revenue has deteriorated at Blockchain Group over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, 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.

Although there are no analyst estimates available for Blockchain Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Blockchain Group?

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

Retrospectively, the last year delivered a frustrating 23% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 110% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 9.3% shows it's noticeably more attractive.

With this information, we find it interesting that Blockchain Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Blockchain Group's P/S?

Blockchain Group's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We didn't quite envision Blockchain Group's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Blockchain Group (2 don't sit too well with us!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.