Investors Give Dexelance S.p.A. (BIT:DEX) Shares A 26% Hiding

To the annoyance of some shareholders, Dexelance S.p.A. (BIT:DEX) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 54% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think Dexelance's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Italy's Consumer Durables industry is similar at about 0.6x. 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.

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View our latest analysis for Dexelance

How Has Dexelance Performed Recently?

Dexelance hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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Is There Some Revenue Growth Forecasted For Dexelance?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.7%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 80% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.0%, which is noticeably less attractive.

With this information, we find it interesting that Dexelance is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

With its share price dropping off a cliff, the P/S for Dexelance looks to be in line with the rest of the Consumer Durables 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.

Looking at Dexelance's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Dexelance (1 is significant!) that you should be aware of before investing here.

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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.