Protektor S.A.'s (WSE:PRT) 33% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/SRatio

The Protektor S.A. (WSE:PRT) share price has softened a substantial 33% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 29% in that time.

Although its price has dipped substantially, there still wouldn't be many who think Protektor's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Poland's Luxury industry is similar at about 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Protektor

How Has Protektor Performed Recently?

As an illustration, revenue has deteriorated at Protektor over the last year, which is not ideal at all. 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 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 Protektor will help you shine a light on its historical performance.

How Is Protektor's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Protektor'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 10%. As a result, revenue from three years ago have also fallen 11% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 7.6% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we find it concerning that Protektor is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Key Takeaway

Protektor's plummeting stock price has brought its P/S back to a similar region as 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.

We find it unexpected that Protektor trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It is also worth noting that we have found 4 warning signs for Protektor (3 are concerning!) that you need to take into consideration.

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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.