Doxee S.p.A.'s (BIT:DOX) Price Is Right But Growth Is Lacking After Shares Rocket 28%

Those holding Doxee S.p.A. (BIT:DOX) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

In spite of the firm bounce in price, when close to half the companies operating in Italy's Software industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Doxee as an enticing stock to check out with its 0.7x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 3 warning signs investors should be aware of before investing in Doxee. Read for free now.

See our latest analysis for Doxee

How Doxee Has Been Performing

Doxee could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

The only time you'd be truly comfortable seeing a P/S as low as Doxee's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.6%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 22% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 11% per annum over the next three years. That's shaping up to be materially lower than the 17% each year growth forecast for the broader industry.

With this in consideration, its clear as to why Doxee's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

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

Doxee's stock price has surged recently, but its but its P/S still remains modest. 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.

We've established that Doxee maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Doxee has 3 warning signs (and 1 which is concerning) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.