The Nu Skin Enterprises, Inc. (NYSE:NUS) share price has fared very poorly over the last month, falling by a substantial 28%. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Even after such a large drop in price, Nu Skin Enterprises' price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Personal Products industry in the United States, where around half of the companies have P/S ratios above 1.7x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Nu Skin Enterprises' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Nu Skin Enterprises' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Nu Skin Enterprises' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Nu Skin Enterprises' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 12% decrease to the company's top line. As a result, revenue from three years ago have also fallen 24% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 7.9% as estimated by the three analysts watching the company. That's not great when the rest of the industry is expected to grow by 8.1%.

In light of this, it's understandable that Nu Skin Enterprises' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Nu Skin Enterprises' P/S?

Nu Skin Enterprises' P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Nu Skin Enterprises' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Nu Skin Enterprises' poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Nu Skin Enterprises that 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.