Time People Group AB (publ)'s (NGM:TPGR) 35% Dip In Price Shows Sentiment Is Matching Revenues

The Time People Group AB (publ) (NGM:TPGR) share price has fared very poorly over the last month, falling by a substantial 35%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 66% loss during that time.

Following the heavy fall in price, when close to half the companies operating in Sweden's IT industry have price-to-sales ratios (or "P/S") above 0.9x, you may consider Time People Group as an enticing stock to check out with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Time People Group

What Does Time People Group's Recent Performance Look Like?

For instance, Time People Group's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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.

Is There Any Revenue Growth Forecasted For Time People Group?

Time People Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 28%. This means it has also seen a slide in revenue over the longer-term as revenue is down 28% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to decline by 1.4% over the next year, or less than the company's recent medium-term annualised revenue decline.

With this in consideration, it's no surprise that Time People Group's P/S falls short of its industry peers. However, when revenue shrink rapidly P/S often shrinks too, which could set up shareholders for future disappointment regardless. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth, which would be difficult to do with the current industry outlook.

The Final Word

Time People Group's P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Time People Group revealed its sharp three-year contraction in revenue is contributing to its low P/S, given the industry is set to shrink less severely. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. However, we're still cautious about the company's ability to prevent an acceleration of its recent medium-term course and resist even greater pain to its business from the broader industry turmoil. In the meantime, unless the company's relative performance improves, the share price will hit a barrier around these levels.

Having said that, be aware Time People Group is showing 3 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Time People Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.