Coreo AG (ETR:COR) Not Doing Enough For Some Investors As Its Shares Slump 30%

Unfortunately for some shareholders, the Coreo AG (ETR:COR) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.

After such a large drop in price, Coreo may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Capital Markets industry in Germany have P/S ratios greater than 2.2x and even P/S higher than 14x are not unusual. However, the P/S might be quite 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 Coreo

How Coreo Has Been Performing

For example, consider that Coreo's 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 Coreo's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Coreo?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.2%. This means it has also seen a slide in revenue over the longer-term as revenue is down 20% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for a contraction of 2.3% shows the industry is more attractive on an annualised basis regardless.

With this in consideration, it's no surprise that Coreo's P/S falls short of its industry peers. Nonetheless, with revenue going quickly in reverse, it's not guaranteed that the P/S has found a floor yet. Even just maintaining these prices will be difficult to achieve as recent revenue trends are already weighing down the shares heavily.

The Final Word

Shares in Coreo have plummeted and its P/S has followed suit. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It's clear that Coreo trades at a low P/S relative to the wider industry on the weakness of its recent three-year revenue being even worse than the forecasts for a struggling industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Although, we would be concerned whether the company can even maintain its medium-term level of performance under these tough industry conditions. In the meantime, unless the company's relative performance improves, the share price will hit a barrier around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Coreo you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.