S.C. ArcelorMittal Hunedoara S.A. (BVB:SIDG) Shares May Have Slumped 37% But Getting In Cheap Is Still Unlikely

S.C. ArcelorMittal Hunedoara S.A. (BVB:SIDG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 37% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 35% in that time.

Even after such a large drop in price, it's still not a stretch to say that S.C. ArcelorMittal Hunedoara's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in Romania, seeing as it matches the P/S ratio of the wider industry. 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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See our latest analysis for S.C. ArcelorMittal Hunedoara

How S.C. ArcelorMittal Hunedoara Has Been Performing

For example, consider that S.C. ArcelorMittal Hunedoara's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on S.C. ArcelorMittal Hunedoara's earnings, revenue and cash flow.

How Is S.C. ArcelorMittal Hunedoara's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like S.C. ArcelorMittal Hunedoara'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 38%. As a result, revenue from three years ago have also fallen 46% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 23% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's somewhat alarming that S.C. ArcelorMittal Hunedoara's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. 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.

What We Can Learn From S.C. ArcelorMittal Hunedoara's P/S?

Following S.C. ArcelorMittal Hunedoara's share price tumble, its P/S is just clinging on to the industry median P/S. 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. ArcelorMittal Hunedoara 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. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

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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.