With a price-to-sales (or "P/S") ratio of 0.8x Astronics Corporation (NASDAQ:ATRO) may be sending bullish signals at the moment, given that almost half of all the Aerospace & Defense companies in the United States have P/S ratios greater than 1.9x and even P/S higher than 4x 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.
View our latest analysis for Astronics
NasdaqGS:ATRO Price to Sales Ratio vs Industry January 8th 2024
How Astronics Has Been Performing
With revenue growth that's superior to most other companies of late, Astronics has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Astronics.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as Astronics' is when the company's growth is on track to lag the industry.
Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The latest three year period has also seen a 11% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 11%, the company is positioned for a stronger revenue result.
With this information, we find it odd that Astronics is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Key Takeaway
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.
A look at Astronics' 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. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.
It is also worth noting that we have found 2 warning signs for Astronics (1 is concerning!) that you need to take into consideration.
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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