Some Confidence Is Lacking In The Mission Group plc (LON:TMG) As Shares Slide 26%

The Mission Group plc (LON:TMG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The last month has meant the stock is now only up 3.4% during the last year.

Although its price has dipped substantially, there still wouldn't be many who think Mission Group's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in the United Kingdom's Media industry is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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See our latest analysis for Mission Group

What Does Mission Group's Recent Performance Look Like?

Mission Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

Mission Group's 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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 19%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the sole analyst covering the company are not good at all, suggesting revenue should decline by 50% over the next year. The industry is also set to see revenue decline 1.0% but the stock is shaping up to perform materially worse.

In light of this, it's somewhat peculiar that Mission Group's P/S sits in line with the majority of other companies. With revenue going quickly in reverse, it's not guaranteed that the P/S has found a floor yet. There's potential for the P/S to fall to lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Mission Group's P/S

Following Mission Group's share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Mission Group's analyst forecasts have revealed that its even shakier outlook against the industry isn't impacting its P/S as much as we would have predicted. It's not unusual in cases where revenue growth is poor, that the share price declines, sending the moderate P/S lower relative to the industry. We're also cautious about the company's ability to resist even greater pain to its business from the broader industry turmoil. This presents a risk to investors if the P/S were to decline to a level that more accurately reflects the company's revenue prospects.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Mission Group that you need to be mindful of.

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