Alta Equipment Group Inc. (NYSE:ALTG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 31% in that time.

Following the heavy fall in price, it would be understandable if you think Alta Equipment Group is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.2x, considering almost half the companies in the United States' Trade Distributors industry have P/S ratios above 1.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Alta Equipment Group's Recent Performance Look Like?

Alta Equipment Group could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

How Is Alta Equipment Group's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Alta Equipment Group's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. This was backed up an excellent period prior to see revenue up by 97% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 4.1% each year as estimated by the five analysts watching the company. With the industry predicted to deliver 6.8% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Alta Equipment Group's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Alta Equipment Group's P/S

The southerly movements of Alta Equipment Group's shares means its P/S is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Alta Equipment Group's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 3 warning signs for Alta Equipment Group (1 is a bit concerning!) that we have uncovered.

If these risks are making you reconsider your opinion on Alta Equipment Group, 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.