CS Disco, Inc.'s (NYSE:LAW) price-to-sales (or "P/S") ratio of 3.3x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.3x and even P/S above 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
NYSE:LAW Price to Sales Ratio vs Industry February 23rd 2024
What Does CS Disco's P/S Mean For Shareholders?
CS Disco hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Keen to find out how analysts think CS Disco's future stacks up against the industry? In that case, our free report is a great place to start.
Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, CS Disco would need to produce sluggish growth that's trailing the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.2%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 97% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 14% per year during the coming three years according to the seven analysts following the company. That's shaping up to be similar to the 15% per year growth forecast for the broader industry.
With this information, we find it odd that CS Disco 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.
The Key Takeaway
It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Our examination of CS Disco's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with CS Disco, 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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CS Disco, Inc. 's(纽约证券交易所代码:LAW)的市销率(或 “市盈率”)为3.3倍,与美国的软件行业相比,目前可能看起来像买入。在美国,约有一半的公司的市盈率高于4.3倍,甚至市盈率高于12倍也很常见。但是,我们需要更深入地挖掘以确定降低市销率是否有合理的依据。