Investors Give Trinity Biotech plc (NASDAQ:TRIB) Shares A 38% Hiding

The Trinity Biotech plc (NASDAQ:TRIB) share price has fared very poorly over the last month, falling by a substantial 38%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 65% loss during that time.

Since its price has dipped substantially, Trinity Biotech may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.3x and even P/S higher than 7x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Trinity Biotech

What Does Trinity Biotech's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Trinity Biotech's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Trinity Biotech's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as depressed as Trinity Biotech's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 50% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 9.0% growth forecast for the broader industry.

In light of this, it's peculiar that Trinity Biotech's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Having almost fallen off a cliff, Trinity Biotech's share price has pulled its P/S way down as well. 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.

A look at Trinity Biotech's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 5 warning signs for Trinity Biotech you should be aware of, and 2 of them shouldn't be ignored.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.