Some Shareholders Feeling Restless Over ShiftPixy, Inc.'s (NASDAQ:PIXY) P/S Ratio
It's not a stretch to say that ShiftPixy, Inc.'s (NASDAQ:PIXY) price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" for companies in the Professional Services industry in the United States, where the median P/S ratio is around 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for ShiftPixy
What Does ShiftPixy's Recent Performance Look Like?
While the industry has experienced revenue growth lately, ShiftPixy's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on ShiftPixy.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like ShiftPixy's is when the company's growth is tracking the industry closely.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 30%. Even so, admirably revenue has lifted 108% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Looking ahead now, revenue is anticipated to slump, contracting by 14% during the coming year according to the one analyst following the company. With the industry predicted to deliver 7.1% growth, that's a disappointing outcome.
With this information, we find it concerning that ShiftPixy is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.
The Bottom Line On ShiftPixy's P/S
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.
It appears that ShiftPixy currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.
It is also worth noting that we have found 6 warning signs for ShiftPixy (4 are concerning!) that you need to take into consideration.
If these risks are making you reconsider your opinion on ShiftPixy, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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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