More Unpleasant Surprises Could Be In Store For S.C. ArcelorMittal Hunedoara S.A.'s (BVB:SIDG) Shares After Tumbling 31%

The S.C. ArcelorMittal Hunedoara S.A. (BVB:SIDG) share price has fared very poorly over the last month, falling by a substantial 31%. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Although its price has dipped substantially, there still wouldn't be many who think S.C. ArcelorMittal Hunedoara's price-to-sales (or "P/S") ratio of 0.5x 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.

View our latest analysis for S.C. ArcelorMittal Hunedoara

What Does S.C. ArcelorMittal Hunedoara's Recent Performance Look Like?

For example, consider that S.C. ArcelorMittal Hunedoara's financial performance has been poor lately as its revenue has been in decline. 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 S.C. ArcelorMittal Hunedoara will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For S.C. ArcelorMittal Hunedoara?

S.C. ArcelorMittal Hunedoara'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.

Retrospectively, the last year delivered a frustrating 3.6% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 23% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 36% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that S.C. ArcelorMittal Hunedoara is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Key Takeaway

Following S.C. ArcelorMittal Hunedoara'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.

Our examination of S.C. ArcelorMittal Hunedoara revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Before you settle on your opinion, we've discovered 3 warning signs for S.C. ArcelorMittal Hunedoara (2 are significant!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.