Market Cool On Alfen N.V.'s (AMS:ALFEN) Revenues Pushing Shares 25% Lower

Unfortunately for some shareholders, the Alfen N.V. (AMS:ALFEN) share price has dived 25% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 72% share price decline.

Although its price has dipped substantially, considering around half the companies operating in the Netherlands' Electrical industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Alfen as an solid investment opportunity with its 0.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Alfen

What Does Alfen's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Alfen has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Alfen's Revenue Growth Trending?

Alfen's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. Pleasingly, revenue has also lifted 146% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 9.8% per year as estimated by the ten analysts watching the company. That's shaping up to be similar to the 9.3% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Alfen's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

The southerly movements of Alfen's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Alfen's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Having said that, be aware Alfen is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning.

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.