Positive Sentiment Still Eludes Basic-Fit N.V. (AMS:BFIT) Following 26% Share Price Slump

Basic-Fit N.V. (AMS:BFIT) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 21% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Basic-Fit's P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in the Netherlands is also close to 1x. 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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View our latest analysis for Basic-Fit

How Has Basic-Fit Performed Recently?

With revenue growth that's superior to most other companies of late, Basic-Fit has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Basic-Fit?

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

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen an excellent 257% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 12% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 8.2% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Basic-Fit's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Basic-Fit's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Basic-Fit looks to be in line with the rest of the Hospitality industry. 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.

Looking at Basic-Fit's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Basic-Fit (1 is a bit concerning!) that you need to be mindful of.

If you're unsure about the strength of Basic-Fit's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.