Yahoo Finance Access Intelligence Plc's (LON:ACC) Low P/S No Reason For Excitement
Access Intelligence Plc's (LON:ACC) price-to-sales (or "P/S") ratio of 1.1x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Software industry in the United Kingdom have P/S ratios greater than 2.5x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for Access Intelligence
What Does Access Intelligence's P/S Mean For Shareholders?
With revenue growth that's inferior to most other companies of late, Access Intelligence has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Access Intelligence will help you uncover what's on the horizon.
Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Access Intelligence would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Pleasingly, revenue has also lifted 286% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 4.7% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.6%, which is noticeably more attractive.
With this in consideration, its clear as to why Access Intelligence's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What Does Access Intelligence's P/S Mean For Investors?
While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
As expected, our analysis of Access Intelligence's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
You should always think about risks. Case in point, we've spotted 3 warning signs for Access Intelligence you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
