Hyster-Yale Materials Handling, Inc. (NYSE:HY) Screens Well But There Might Be A Catch
Hyster-Yale Materials Handling, Inc.'s (NYSE:HY) price-to-sales (or "P/S") ratio of 0.2x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Machinery industry in the United States have P/S ratios greater than 1.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
Check out our latest analysis for Hyster-Yale Materials Handling
How Has Hyster-Yale Materials Handling Performed Recently?
Hyster-Yale Materials Handling certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Hyster-Yale Materials Handling will help you uncover what's on the horizon.
How Is Hyster-Yale Materials Handling's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as low as Hyster-Yale Materials Handling's is when the company's growth is on track to lag the industry.
Taking a look back first, we see that the company grew revenue by an impressive 20% last year. Pleasingly, revenue has also lifted 39% 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 year should generate growth of 2.4% as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 2.3%, which is not materially different.
With this information, we find it odd that Hyster-Yale Materials Handling is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Bottom Line On Hyster-Yale Materials Handling's P/S
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.
It looks to us like the P/S figures for Hyster-Yale Materials Handling remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Hyster-Yale Materials Handling that 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).
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
