Revenues Working Against Zenvia Inc.'s (NASDAQ:ZENV) Share Price Following 26% Dive

The Zenvia Inc. (NASDAQ:ZENV) share price has fared very poorly over the last month, falling by a substantial 26%. Longer-term shareholders would now have taken a real hit with the stock declining 3.3% in the last year.

Following the heavy fall in price, Zenvia may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 5x and even P/S higher than 13x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Zenvia

How Has Zenvia Performed Recently?

With revenue growth that's superior to most other companies of late, Zenvia has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zenvia.

Is There Any Revenue Growth Forecasted For Zenvia?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Zenvia's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. The latest three year period has also seen an excellent 75% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 14% over the next year. Meanwhile, the rest of the industry is forecast to expand by 25%, which is noticeably more attractive.

In light of this, it's understandable that Zenvia's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Shares in Zenvia have plummeted and its P/S has followed suit. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Zenvia's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 4 warning signs for Zenvia (1 can't be ignored!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.