XBP Europe Holdings, Inc. (NASDAQ:XBP) shareholders that were waiting for something to happen have been dealt a blow with a 37% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 88% loss during that time.
Since its price has dipped substantially, XBP Europe Holdings 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 Diversified Financial industry in the United States have P/S ratios greater than 2.5x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
What Does XBP Europe Holdings' Recent Performance Look Like?
For example, consider that XBP Europe Holdings' financial performance has been poor lately as its revenue has been in decline. 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.
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 XBP Europe Holdings' earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like XBP Europe Holdings' to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.7%. This means it has also seen a slide in revenue over the longer-term as revenue is down 23% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Comparing that to the industry, which is predicted to deliver 1.5% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this in mind, we understand why XBP Europe Holdings' P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.
The Key Takeaway
Shares in XBP Europe Holdings have plummeted and its P/S has followed suit. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
Our examination of XBP Europe Holdings confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 6 warning signs with XBP Europe Holdings (at least 5 which don't sit too well with us), and understanding these should be part of your investment process.
If you're unsure about the strength of XBP Europe Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
我們對XBP Europe Holdings的審查證實,鑑於該行業預計將增長,該公司在過去的中期收入萎縮是其低市銷率的關鍵因素。目前,股東們正在接受低市銷率,因爲他們承認未來的收入可能也不會帶來任何驚喜。鑑於目前的情況,如果最近的中期收入趨勢持續下去,股價似乎不太可能在不久的將來雙向出現任何重大波動。
始終有必要考慮永遠存在的投資風險幽靈。我們已經向XBP Europe Holdings發現了6個警告信號(至少有5個對我們來說不太合適),了解這些信號應該是您投資過程的一部分。
如果您不確定XBP Europe Holdings的業務實力,爲什麼不瀏覽我們的互動式股票清單,其中列出了一些您可能錯過的其他公司,這些股票具有穩健的業務基本面。