Hamama Meir Trading (1996) Ltd.'s (TLV:HMAM) 33% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

Hamama Meir Trading (1996) Ltd. (TLV:HMAM) shareholders that were waiting for something to happen have been dealt a blow with a 33% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think Hamama Meir Trading (1996)'s price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Israel's Consumer Retailing industry is similar at about 0.3x. 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.

View our latest analysis for Hamama Meir Trading (1996)

What Does Hamama Meir Trading (1996)'s P/S Mean For Shareholders?

The revenue growth achieved at Hamama Meir Trading (1996) over the last year would be more than acceptable for most companies. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hamama Meir Trading (1996)'s earnings, revenue and cash flow.

How Is Hamama Meir Trading (1996)'s Revenue Growth Trending?

In order to justify its P/S ratio, Hamama Meir Trading (1996) would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.1%. Still, lamentably revenue has fallen 7.1% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we find it concerning that Hamama Meir Trading (1996) is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Hamama Meir Trading (1996)'s P/S Mean For Investors?

Following Hamama Meir Trading (1996)'s share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

The fact that Hamama Meir Trading (1996) currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Hamama Meir Trading (1996) (2 are significant!) 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.