Some Rizzo Group AB (publ) (STO:RIZZO B) Shareholders Look For Exit As Shares Take 36% Pounding

Rizzo Group AB (publ) (STO:RIZZO B) shareholders won't be pleased to see that the share price has had a very rough month, dropping 36% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 62% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think Rizzo Group's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when it essentially matches the median P/S in Sweden's Specialty Retail 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.

See our latest analysis for Rizzo Group

What Does Rizzo Group's P/S Mean For Shareholders?

For instance, Rizzo Group's receding revenue in recent times would have to be some food for thought. 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.

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 Rizzo Group's earnings, revenue and cash flow.

How Is Rizzo Group's Revenue Growth Trending?

Rizzo 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.

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 32%. As a result, revenue from three years ago have also fallen 65% 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 3.2% 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 Rizzo Group'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.

The Bottom Line On Rizzo Group's P/S

Rizzo Group's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We find it unexpected that Rizzo Group 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. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Plus, you should also learn about these 6 warning signs we've spotted with Rizzo Group.

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.