Getting In Cheap On Custom Truck One Source, Inc. (NYSE:CTOS) Might Be Difficult
It's not a stretch to say that Custom Truck One Source, Inc.'s (NYSE:CTOS) price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" for companies in the Trade Distributors industry in the United States, where the median P/S ratio is around 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for Custom Truck One Source
How Custom Truck One Source Has Been Performing
With revenue growth that's superior to most other companies of late, Custom Truck One Source has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Custom Truck One Source will help you uncover what's on the horizon.
Do Revenue Forecasts Match The P/S Ratio?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Custom Truck One Source's to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 27% last year. This great performance means it was also able to deliver immense revenue growth 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 six analysts covering the company suggest revenue should grow by 3.1% over the next year. With the industry predicted to deliver 4.6% growth , the company is positioned for a comparable revenue result.
With this in mind, it makes sense that Custom Truck One Source's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.
What We Can Learn From Custom Truck One Source's P/S?
It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
A Custom Truck One Source's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Trade Distributors industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Custom Truck One Source (1 doesn't sit too well with us) you should be aware of.
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.
