Some Confidence Is Lacking In Rodna Zemya Holding AD (BUL:HRZ) As Shares Slide 49%

Rodna Zemya Holding AD (BUL:HRZ) shares have had a horrible month, losing 49% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Rodna Zemya Holding AD's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Industrials industry in Bulgaria is also close to 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for Rodna Zemya Holding AD

What Does Rodna Zemya Holding AD's Recent Performance Look Like?

For example, consider that Rodna Zemya Holding AD's financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Rodna Zemya Holding AD will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

Rodna Zemya Holding AD's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.3%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 7.6% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 5.5% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Rodna Zemya Holding AD's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What We Can Learn From Rodna Zemya Holding AD's P/S?

Rodna Zemya Holding AD's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We've established that Rodna Zemya Holding AD's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware Rodna Zemya Holding AD is showing 2 warning signs in our investment analysis, you should know about.

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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.