Market Cool On Dometic Group AB (publ)'s (STO:DOM) Revenues Pushing Shares 27% Lower

To the annoyance of some shareholders, Dometic Group AB (publ) (STO:DOM) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Dometic Group's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Auto Components industry in Sweden is also close to 0.3x. 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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Check out our latest analysis for Dometic Group

What Does Dometic Group's Recent Performance Look Like?

Dometic Group hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Dometic Group will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Dometic Group?

Dometic Group'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 13% decrease to the company's top line. As a result, revenue from three years ago have also fallen 25% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should demonstrate some strength in company's business, generating growth of 1.3% each year as estimated by the six analysts watching the company. While this isn't a particularly impressive figure, it should be noted that the the industry is expected to decline by 0.9% per year.

Even though the growth is only slight, it's peculiar that Dometic Group's P/S sits in line with the majority of other companies given the industry is set for a decline. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

What We Can Learn From Dometic Group's P/S?

With its share price dropping off a cliff, the P/S for Dometic Group looks to be in line with the rest of the Auto Components industry. 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 Dometic Group currently trades on a lower than expected P/S since its growth forecasts are potentially beating a struggling industry. There could be some unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. The market could be pricing in the event that tough industry conditions will impact future revenues. At least the risk of a price drop looks to be subdued, 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 2 warning signs for Dometic Group (1 makes us a bit uncomfortable) you should be aware of.

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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.