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With a price-to-sales (or "P/S") ratio of 1x Serviceware SE (ETR:SJJ) may be sending bullish signals at the moment, given that almost half of all the Software companies in Germany have P/S ratios greater than 2.4x and even P/S higher than 5x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Serviceware
How Has Serviceware Performed Recently?
Recent times haven't been great for Serviceware as its revenue has been rising slower than most other companies. 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.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Serviceware.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
Serviceware's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Fortunately, a few good years before that means that it was still able to grow revenue by 25% in total over the last three years. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 8.7% per year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 7.1% per annum, which is not materially different.
With this information, we find it odd that Serviceware is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
What Does Serviceware's P/S Mean For Investors?
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
It looks to us like the P/S figures for Serviceware remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.