Seri Industrial S.p.A. (BIT:SERI) Might Not Be As Mispriced As It Looks After Plunging 25%

To the annoyance of some shareholders, Seri Industrial S.p.A. (BIT:SERI) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 25% share price drop.

Although its price has dipped substantially, there still wouldn't be many who think Seri Industrial's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Italy's Chemicals industry is similar at about 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.

Check out our latest analysis for Seri Industrial

How Seri Industrial Has Been Performing

Recent revenue growth for Seri Industrial has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Seri Industrial will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Keen to find out how analysts think Seri Industrial's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Seri Industrial's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Seri Industrial's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 3.7%. The solid recent performance means it was also able to grow revenue by 19% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 52% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 7.3% growth forecast for the broader industry.

With this information, we find it interesting that Seri Industrial 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.

The Bottom Line On Seri Industrial's P/S

With its share price dropping off a cliff, the P/S for Seri Industrial looks to be in line with the rest of the Chemicals industry. 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.

Despite enticing revenue growth figures that outpace the industry, Seri Industrial's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 2 warning signs for Seri Industrial that you need to take into consideration.

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.