Little Excitement Around Neosperience S.p.A.'s (BIT:NSP) Revenues As Shares Take 27% Pounding

To the annoyance of some shareholders, Neosperience S.p.A. (BIT:NSP) shares are down a considerable 27% 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 68% loss during that time.

Since its price has dipped substantially, it would be understandable if you think Neosperience is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in Italy's Software industry have P/S ratios above 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Neosperience

How Neosperience Has Been Performing

There hasn't been much to differentiate Neosperience's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Neosperience will be hoping that this isn't the case.

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

How Is Neosperience's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 41% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 5.8% per year during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 11% per year, which is noticeably more attractive.

In light of this, it's understandable that Neosperience's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Neosperience's P/S?

Neosperience's P/S has taken a dip along with its share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Neosperience's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Neosperience (2 are significant!) that you should be aware of before investing here.

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.