Market Cool On Doxee S.p.A.'s (BIT:DOX) Revenues Pushing Shares 26% Lower

To the annoyance of some shareholders, Doxee S.p.A. (BIT:DOX) shares are down a considerable 26% 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 47% share price drop.

Even after such a large drop in price, it's still not a stretch to say that Doxee's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Software industry in Italy, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Doxee

What Does Doxee's Recent Performance Look Like?

Recent times haven't been great for Doxee as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

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.

Is There Some Revenue Growth Forecasted For Doxee?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 34% overall rise in revenue, in spite of its uninspiring short-term performance. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 18% each year during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 14% per annum, which is noticeably less attractive.

With this information, we find it interesting that Doxee is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Doxee looks to be in line with the rest of the Software industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Despite enticing revenue growth figures that outpace the industry, Doxee's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You should always think about risks. Case in point, we've spotted 4 warning signs for Doxee you should be aware of, and 1 of them is a bit concerning.

If these risks are making you reconsider your opinion on Doxee, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.