Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month.    The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 73% loss during that time.  

Since its price has dipped substantially, Altisource Portfolio Solutions may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 1.9x and even P/S higher than 10x 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 limited.  

View our latest analysis for Altisource Portfolio Solutions

NasdaqGS:ASPS Price to Sales Ratio vs Industry December 20th 2023

What Does Altisource Portfolio Solutions' P/S Mean For Shareholders?

Altisource Portfolio Solutions could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth.   The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better.  If you still like the company, you'd be hoping this isn't the case so that you could potentially 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 Altisource Portfolio Solutions.

What Are Revenue Growth Metrics Telling Us About The Low P/S?  

The only time you'd be truly comfortable seeing a P/S as low as Altisource Portfolio Solutions' is when the company's growth is on track to lag the industry.  

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 7.2%.   As a result, revenue from three years ago have also fallen 67% overall.  So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.  

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 14% over the next year.  With the industry only predicted to deliver 10.0%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Altisource Portfolio Solutions is trading at a P/S lower than the industry.  It looks like most investors are not convinced at all that the company can achieve future growth expectations.  

What We Can Learn From Altisource Portfolio Solutions' P/S?

Altisource Portfolio Solutions' recently weak share price has pulled its P/S back below other Real Estate companies.      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.

A look at Altisource Portfolio Solutions' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.    

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Altisource Portfolio Solutions (at least 2 which make us uncomfortable), and understanding these should be part of your investment process.  

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.