Spectrum Brands Holdings, Inc.'s (NYSE:SPB) price-to-sales (or "P/S") ratio of 1x might make it look like a buy right now compared to the Household Products industry in the United States, where around half of the companies have P/S ratios above 1.6x 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 Spectrum Brands Holdings' Recent Performance Look Like?

Spectrum Brands Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still 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.

Do Revenue Forecasts Match The Low P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.1%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 25% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 2.1% per annum over the next three years. With the industry predicted to deliver 3.4% growth per year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Spectrum Brands Holdings' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Spectrum Brands Holdings' P/S Mean For Investors?

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.

It looks to us like the P/S figures for Spectrum Brands Holdings remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Spectrum Brands Holdings.

If you're unsure about the strength of Spectrum Brands Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.