Mawson Infrastructure Group, Inc. (NASDAQ:MIGI) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 26% share price drop.

Following the heavy fall in price, Mawson Infrastructure Group's price-to-sales (or "P/S") ratio of 0.8x might make it look like a strong buy right now compared to the wider Software industry in the United States, where around half of the companies have P/S ratios above 4.7x and even P/S above 11x 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 so limited.

Check out our latest analysis for Mawson Infrastructure Group

How Mawson Infrastructure Group Has Been Performing

Mawson Infrastructure Group hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. 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.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered a frustrating 47% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 1.8% over the next year. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.

With this information, we can see why Mawson Infrastructure Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Having almost fallen off a cliff, Mawson Infrastructure Group's share price has pulled its P/S way down as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Mawson Infrastructure Group's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Mawson Infrastructure Group has 5 warning signs (and 2 which are significant) we think you should know about.

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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