Market Cool On Time People Group AB (publ)'s (NGM:TPGR) Revenues Pushing Shares 27% Lower

To the annoyance of some shareholders, Time People Group AB (publ) (NGM:TPGR) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.

Since its price has dipped substantially, it would be understandable if you think Time People Group is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in Sweden's IT industry have P/S ratios above 0.8x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Time People Group

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

For instance, Time People Group's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Time People Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 21% 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 12% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 1.6% shows it's a great look while it lasts.

In light of this, it's quite peculiar that Time People Group's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

The Final Word

Time People Group's recently weak share price has pulled its P/S back below other IT companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Upon analysing the past data, we see it is unexpected that Time People Group is currently trading at a lower P/S than the rest of the industry given that its revenue growth in the past three-year years is exceeding expectations in a challenging industry. We think potential risks might be placing significant pressure on the P/S ratio and share price. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. At least the risk of a price drop looks to be subdued, but investors think future revenue could see a lot of volatility.

It is also worth noting that we have found 5 warning signs for Time People Group (4 are a bit unpleasant!) that you need to take into consideration.

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.