Market Cool On Union Technologies Informatique Group S.A.'s (EPA:FPG) Revenues Pushing Shares 54% Lower

The Union Technologies Informatique Group S.A. (EPA:FPG) share price has fared very poorly over the last month, falling by a substantial 54%. For any long-term shareholders, the last month ends a year to forget by locking in a 81% share price decline.

Following the heavy fall in price, considering around half the companies operating in France's IT industry have price-to-sales ratios (or "P/S") above 0.6x, you may consider Union Technologies Informatique Group as an solid investment opportunity with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Union Technologies Informatique Group

What Does Union Technologies Informatique Group's P/S Mean For Shareholders?

For instance, Union Technologies Informatique Group's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 Union Technologies Informatique Group will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Union Technologies Informatique Group would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.7%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 16% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to shrink 0.4% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

With this information, we find it very odd that Union Technologies Informatique Group is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Union Technologies Informatique Group's P/S?

The southerly movements of Union Technologies Informatique Group's shares means its P/S is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Looking at the figures, it's surprising to see Union Technologies Informatique Group currently trades on a much lower than expected P/S since its recent three-year revenue growth is beating forecasts for a struggling industry. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this positive performance. The most obvious risk is that its revenue trajectory may not keep outperforming under these tough industry conditions. It appears many are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.

Having said that, be aware Union Technologies Informatique Group is showing 5 warning signs in our investment analysis, you should know about.

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.