Sphere 3D Corp. (NASDAQ:ANY) Stock's 28% Dive Might Signal An Opportunity But It Requires Some Scrutiny
To the annoyance of some shareholders, Sphere 3D Corp. (NASDAQ:ANY) shares are down a considerable 28% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.
Following the heavy fall in price, Sphere 3D may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.9x and even P/S higher than 11x are not unusual. 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.
View our latest analysis for Sphere 3D
What Does Sphere 3D's P/S Mean For Shareholders?
While the industry has experienced revenue growth lately, Sphere 3D's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Want the full picture on analyst estimates for the company? Then our free report on Sphere 3D will help you uncover what's on the horizon.How Is Sphere 3D's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as depressed as Sphere 3D's is when the company's growth is on track to lag the industry decidedly.
Retrospectively, the last year delivered a frustrating 49% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 102% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Looking ahead now, revenue is anticipated to climb by 27% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 22%, the company is positioned for a stronger revenue result.
With this in consideration, we find it intriguing that Sphere 3D's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
What Does Sphere 3D's P/S Mean For Investors?
Having almost fallen off a cliff, Sphere 3D's share price has pulled its P/S way down as well. 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 look at Sphere 3D's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
You should always think about risks. Case in point, we've spotted 5 warning signs for Sphere 3D you should be aware of, and 3 of them are a bit unpleasant.
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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