SIT S.p.A.'s (BIT:SIT) 38% Jump Shows Its Popularity With Investors

Explore SIT's Fair Values from the Community and select yours

SIT S.p.A. (BIT:SIT) shareholders would be excited to see that the share price has had a great month, posting a 38% gain and recovering from prior weakness. Looking further back, the 18% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, there still wouldn't be many who think SIT's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Italy's Electronic industry is similar at about 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Check out our latest analysis for SIT

How Has SIT Performed Recently?

SIT could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SIT.

Do Revenue Forecasts Match The P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.6%. The last three years don't look nice either as the company has shrunk revenue by 21% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 8.0% over the next year. That's shaping up to be similar to the 6.6% growth forecast for the broader industry.

With this information, we can see why SIT is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

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

SIT's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A SIT's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Electronic industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with SIT, and understanding them should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.