The One Stop Systems, Inc. (NASDAQ:OSS) share price has done very well over the last month, posting an excellent gain of 56%. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about One Stop Systems' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Tech industry in the United States is also close to 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does One Stop Systems' Recent Performance Look Like?

One Stop Systems could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

How Is One Stop Systems' Revenue Growth Trending?

In order to justify its P/S ratio, One Stop Systems would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.3%. Regardless, revenue has managed to lift by a handy 17% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the five analysts covering the company suggest revenue growth is heading into negative territory, declining 7.4% over the next year. Meanwhile, the broader industry is forecast to expand by 3.9%, which paints a poor picture.

In light of this, it's somewhat alarming that One Stop Systems' P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What We Can Learn From One Stop Systems' P/S?

Its shares have lifted substantially and now One Stop Systems' P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It appears that One Stop Systems currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Plus, you should also learn about these 5 warning signs we've spotted with One Stop Systems.

If these risks are making you reconsider your opinion on One Stop Systems, 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.