Take Care Before Diving Into The Deep End On Alta Equipment Group Inc. (NYSE:ALTG)
With a price-to-sales (or "P/S") ratio of 0.3x Alta Equipment Group Inc. (NYSE:ALTG) may be sending bullish signals at the moment, given that almost half of all the Trade Distributors companies in the United States have P/S ratios greater than 0.9x and even P/S higher than 3x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Alta Equipment Group
What Does Alta Equipment Group's P/S Mean For Shareholders?
Alta Equipment Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
Want the full picture on analyst estimates for the company? Then our free report on Alta Equipment Group will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Alta Equipment Group?
Alta Equipment Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
Retrospectively, the last year delivered an exceptional 30% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 161% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 8.3% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 5.9% each year, which is noticeably less attractive.
With this in consideration, we find it intriguing that Alta Equipment Group's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Key Takeaway
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.
To us, it seems Alta Equipment Group currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.
Having said that, be aware Alta Equipment Group is showing 1 warning sign in our investment analysis, you should know about.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
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