It's Down 40% But Fidia S.p.A. (BIT:FDA) Could Be Riskier Than It Looks

Unfortunately for some shareholders, the Fidia S.p.A. (BIT:FDA) share price has dived 40% 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 82% share price decline.

Although its price has dipped substantially, it's still not a stretch to say that Fidia's price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Machinery industry in Italy, where the median P/S ratio is around 0.7x. 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 Fidia

What Does Fidia's Recent Performance Look Like?

Fidia has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic 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 Fidia will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Fidia's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 33% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 2.7% shows it's noticeably more attractive.

In light of this, it's curious that Fidia's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Fidia's P/S Mean For Investors?

Fidia's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To our surprise, Fidia revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Fidia you should know about.

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