There wouldn't be many who think Dun & Bradstreet Holdings, Inc.'s (NYSE:DNB) price-to-sales (or "P/S") ratio of 1.8x is worth a mention when the median P/S for the Professional Services industry in the United States is similar at about 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
NYSE:DNB Price to Sales Ratio vs Industry April 15th 2024
What Does Dun & Bradstreet Holdings' Recent Performance Look Like?
With revenue growth that's inferior to most other companies of late, Dun & Bradstreet Holdings has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.
Keen to find out how analysts think Dun & Bradstreet Holdings' future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The P/S?
Dun & Bradstreet Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
If we review the last year of revenue growth, the company posted a worthy increase of 4.0%. The latest three year period has also seen an excellent 33% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 5.3% each year over the next three years. With the industry predicted to deliver 7.0% growth each year, the company is positioned for a comparable revenue result.
With this in mind, it makes sense that Dun & Bradstreet Holdings' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.
What We Can Learn From Dun & Bradstreet Holdings' P/S?
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 Dun & Bradstreet Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Professional Services industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Dun & Bradstreet Holdings (1 makes us a bit uncomfortable!) that you need to be mindful of.
If you're unsure about the strength of Dun & Bradstreet Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.