Proteak Uno, S.A.B. de C.V.'s (BMV:TEAKCPO) 52% Share Price Surge Not Quite Adding Up

Proteak Uno, S.A.B. de C.V. (BMV:TEAKCPO) shareholders are no doubt pleased to see that the share price has bounced 52% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 77% share price drop in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Proteak Uno. de's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Forestry industry in Mexico, where the median P/S ratio is around 0.6x. 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.

View our latest analysis for Proteak Uno. de

What Does Proteak Uno. de's P/S Mean For Shareholders?

For example, consider that Proteak Uno. de's financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Proteak Uno. de will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Proteak Uno. de?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 16%. This means it has also seen a slide in revenue over the longer-term as revenue is down 32% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 6.3% shows it's an unpleasant look.

With this in mind, we find it worrying that Proteak Uno. de's P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Final Word

Proteak Uno. de'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.

The fact that Proteak Uno. de currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Before you settle on your opinion, we've discovered 3 warning signs for Proteak Uno. de that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.