doValue S.p.A.'s (BIT:DOV) 29% Jump Shows Its Popularity With Investors

doValue S.p.A. (BIT:DOV) shares have had a really impressive month, gaining 29% after a shaky period beforehand. But the last month did very little to improve the 81% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think doValue's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in Italy's Commercial Services industry is similar at about 1x. 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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Check out our latest analysis for doValue

How Has doValue Performed Recently?

There hasn't been much to differentiate doValue's and the industry's retreating revenue lately. It seems that few are expecting the company's revenue performance to deviate much from most other companies, which has held the P/S back. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

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

How Is doValue's Revenue Growth Trending?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 15% overall from three years ago. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 6.3% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 5.3% each year, which is not materially different.

With this in mind, it makes sense that doValue's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now doValue's P/S is back within range of the industry median. 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.

A doValue's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Commercial Services industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you take the next step, you should know about the 4 warning signs for doValue (2 are potentially serious!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.