Not Many Are Piling Into Modiin Energy-Limited Partnership (TLV:MDIN) Stock Yet As It Plummets 26%

Unfortunately for some shareholders, the Modiin Energy-Limited Partnership (TLV:MDIN) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 51% share price decline.

Following the heavy fall in price, Modiin Energy-Limited Partnership may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.4x, considering almost half of all companies in the Oil and Gas industry in Israel have P/S ratios greater than 1.4x and even P/S higher than 6x aren't out of the ordinary. 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 Modiin Energy-Limited Partnership

What Does Modiin Energy-Limited Partnership's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Modiin Energy-Limited Partnership over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Modiin Energy-Limited Partnership will help you shine a light on its historical performance.

How Is Modiin Energy-Limited Partnership's Revenue Growth Trending?

Modiin Energy-Limited Partnership's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 25% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 1.6% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

It turns out the industry is also predicted to shrink 1.1% in the next 12 months, mirroring the company's downward momentum based on recent medium-term annualised revenue results.

With this information, it's perhaps strange but not a major surprise that Modiin Energy-Limited Partnership is trading at a lower P/S in comparison. In general, shrinking revenues are unlikely to lead to a stable P/S long-term, which could set up shareholders for future disappointment regardless. There is still potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

The Final Word

Modiin Energy-Limited Partnership's recently weak share price has pulled its P/S back below other Oil and Gas companies. 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.

Our examination of Modiin Energy-Limited Partnership revealed its three-year contraction in revenue is impacting its P/S more than we would have predicted, given the industry is set to shrink at a similar rate. There could be some further unobserved threats to revenue preventing the P/S ratio from keeping up with the industry average. One major risk is whether the company can maintain its 'middle of the road' medium-termrevenue growth under these tough industry conditions. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide more support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Modiin Energy-Limited Partnership you should be aware of.

If these risks are making you reconsider your opinion on Modiin Energy-Limited Partnership, 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.