Investors Continue Waiting On Sidelines For CPS Technologies Corporation (NASDAQ:CPSH)
There wouldn't be many who think CPS Technologies Corporation's (NASDAQ:CPSH) price-to-sales (or "P/S") ratio of 2.1x is worth a mention when the median P/S for the Electronic industry in the United States is similar at about 2.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for CPS Technologies
How CPS Technologies Has Been Performing
Recent times have been advantageous for CPS Technologies as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on CPS Technologies.What Are Revenue Growth Metrics Telling Us About The P/S?
CPS Technologies' 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 terrific increase of 38%. The latest three year period has also seen a 14% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 18%, which is noticeably less attractive.
In light of this, it's curious that CPS Technologies' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced 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.
Looking at CPS Technologies' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
Before you settle on your opinion, we've discovered 3 warning signs for CPS Technologies that you should be aware of.
If these risks are making you reconsider your opinion on CPS Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.