Positive Sentiment Still Eludes Archos S.A. (EPA:ALJXR) Following 26% Share Price Slump

Archos S.A. (EPA:ALJXR) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 134% in the last twelve months.

In spite of the heavy fall in price, it's still not a stretch to say that Archos' price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Tech industry in France, where the median P/S ratio is around 0.6x. 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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View our latest analysis for Archos

How Archos Has Been Performing

With revenue growth that's superior to most other companies of late, Archos has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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.

Want the full picture on analyst estimates for the company? Then our free report on Archos will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Archos?

Archos' 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 terrific increase of 63%. The latest three year period has also seen an excellent 109% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 27% each year during the coming three years according to the lone analyst following the company. That's shaping up to be materially higher than the 8.3% per year growth forecast for the broader industry.

With this information, we find it interesting that Archos is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Following Archos' share price tumble, its P/S is just clinging on to the industry median P/S. 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 Archos' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Archos (at least 2 which can't be ignored), and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on Archos, 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.