EverCommerce Inc. (NASDAQ:EVCM) Screens Well But There Might Be A Catch
EverCommerce Inc.'s (NASDAQ:EVCM) price-to-sales (or "P/S") ratio of 3.5x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 10x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for EverCommerce
What Does EverCommerce's P/S Mean For Shareholders?
With revenue growth that's superior to most other companies of late, EverCommerce has been doing relatively well. 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 EverCommerce will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
EverCommerce'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.
Taking a look back first, we see that the company grew revenue by an impressive 27% last year. Pleasingly, revenue has also lifted 156% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Turning to the outlook, the next three years should generate growth of 12% each year as estimated by the twelve analysts watching the company. That's shaping up to be similar to the 13% each year growth forecast for the broader industry.
With this in consideration, we find it intriguing that EverCommerce's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
What Does EverCommerce's P/S Mean For Investors?
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
Our examination of EverCommerce's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
You should always think about risks. Case in point, we've spotted 1 warning sign for EverCommerce you should be aware of.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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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