Yahoo Finance Revenues Working Against Skyfii Limited's (ASX:SKF) Share Price Following 28% Dive
The Skyfii Limited (ASX:SKF) share price has fared very poorly over the last month, falling by a substantial 28%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 29% share price drop.
Following the heavy fall in price, Skyfii may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.7x, considering almost half of all companies in the Software industry in Australia have P/S ratios greater than 2.7x and even P/S higher than 6x 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.
Check out our latest analysis for Skyfii
What Does Skyfii's P/S Mean For Shareholders?
For example, consider that Skyfii's financial performance has been pretty ordinary lately as revenue growth is non-existent. Perhaps the market believes the recent lacklustre revenue performance is a sign of future underperformance relative to industry peers, hurting the P/S. Those who are bullish on Skyfii will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Skyfii will help you shine a light on its historical performance.
Is There Any Revenue Growth Forecasted For Skyfii?
In order to justify its P/S ratio, Skyfii would need to produce anemic growth that's substantially trailing the industry.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 73% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 80% shows it's noticeably less attractive.
In light of this, it's understandable that Skyfii's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
The Key Takeaway
Having almost fallen off a cliff, Skyfii's share price has pulled its P/S way down as well. 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.
In line with expectations, Skyfii maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Skyfii (2 are significant!) that you should be aware of before investing here.
If you're unsure about the strength of Skyfii's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
