Revenues Not Telling The Story For S.C. Saturn S.A. Alba Iulia (BVB:SATU) After Shares Rise 46%

S.C. Saturn S.A. Alba Iulia (BVB:SATU) shareholders have had their patience rewarded with a 46% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 24% is also fairly reasonable.

In spite of the firm bounce in price, there still wouldn't be many who think S.C. Saturn Alba Iulia's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Romania's Metals and Mining industry is similar at about 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.

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View our latest analysis for S.C. Saturn Alba Iulia

What Does S.C. Saturn Alba Iulia's P/S Mean For Shareholders?

For instance, S.C. Saturn Alba Iulia's receding revenue in recent times would have to be some food for thought. 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.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, S.C. Saturn Alba Iulia would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 20%. This means it has also seen a slide in revenue over the longer-term as revenue is down 33% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 4.7% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's somewhat alarming that S.C. Saturn Alba Iulia's P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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 Key Takeaway

Its shares have lifted substantially and now S.C. Saturn Alba Iulia's P/S is back within range of the industry median. 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 look at S.C. Saturn Alba Iulia revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for S.C. Saturn Alba Iulia you should know about.

If these risks are making you reconsider your opinion on S.C. Saturn Alba Iulia, 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.