A Piece Of The Puzzle Missing From VerifyMe, Inc.'s (NASDAQ:VRME) Share Price
With a price-to-sales (or "P/S") ratio of 0.5x VerifyMe, Inc. (NASDAQ:VRME) may be sending bullish signals at the moment, given that almost half of all the Electronic companies in the United States have P/S ratios greater than 1.6x and even P/S higher than 5x are not unusual. 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 VerifyMe
How Has VerifyMe Performed Recently?
With revenue growth that's superior to most other companies of late, VerifyMe has been doing relatively well. 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.
Keen to find out how analysts think VerifyMe's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
There's an inherent assumption that a company should underperform the industry for P/S ratios like VerifyMe's to be considered reasonable.
If we review the last year of revenue growth, we see the company's revenues grew exponentially. The amazing performance means it was also able to deliver huge revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.
Turning to the outlook, the next year should generate growth of 15% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 10%, which is noticeably less attractive.
With this in consideration, we find it intriguing that VerifyMe'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.
What We Can Learn From VerifyMe'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.
A look at VerifyMe's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
Plus, you should also learn about these 4 warning signs we've spotted with VerifyMe.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
