Netweek S.p.A. (BIT:NTW) Shares Slammed 32% But Getting In Cheap Might Be Difficult Regardless

Unfortunately for some shareholders, the Netweek S.p.A. (BIT:NTW) share price has dived 32% 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 69% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think Netweek's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Italy's Media industry is similar at about 0.5x. 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.

See our latest analysis for Netweek

How Has Netweek Performed Recently?

Netweek has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Netweek will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Netweek, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Netweek's Revenue Growth Trending?

In order to justify its P/S ratio, Netweek would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 15%. As a result, it also grew revenue by 13% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 4.9% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

In light of this, it's understandable that Netweek's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Netweek looks to be in line with the rest of the Media industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It appears to us that Netweek maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You always need to take note of risks, for example - Netweek has 4 warning signs we think you should be aware of.

If you're unsure about the strength of Netweek's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.