DB Energy S.A. (WSE:DBE) Might Not Be As Mispriced As It Looks After Plunging 25%

Unfortunately for some shareholders, the DB Energy S.A. (WSE:DBE) share price has dived 25% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 46% in that time.

In spite of the heavy fall in price, there still wouldn't be many who think DB Energy's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in Poland's Commercial Services industry is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for DB Energy

What Does DB Energy's Recent Performance Look Like?

For instance, DB Energy's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for DB Energy, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is DB Energy's Revenue Growth Trending?

DB Energy's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

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 31%. Still, the latest three year period has seen an excellent 102% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 8.0% shows it's noticeably more attractive.

With this information, we find it interesting that DB Energy is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On DB Energy's P/S

Following DB Energy's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that DB Energy currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for DB Energy (1 makes us a bit uncomfortable) you should be aware of.

If these risks are making you reconsider your opinion on DB Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com