L.B. Foster Company (NASDAQ:FSTR) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Still, a bad month hasn't completely ruined the past year with the stock gaining 43%, which is great even in a bull market.

In spite of the heavy fall in price, when close to half the companies operating in the United States' Machinery industry have price-to-sales ratios (or "P/S") above 1.5x, you may still consider L.B. Foster as an enticing stock to check out with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does L.B. Foster's Recent Performance Look Like?

Recent revenue growth for L.B. Foster has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For L.B. Foster?

There's an inherent assumption that a company should underperform the industry for P/S ratios like L.B. Foster's to be considered reasonable.

Retrospectively, the last year delivered a decent 7.5% gain to the company's revenues. Revenue has also lifted 12% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 0.08% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 1.4%, which is not materially different.

With this in consideration, we find it intriguing that L.B. Foster's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does L.B. Foster's P/S Mean For Investors?

L.B. Foster's recently weak share price has pulled its P/S back below other Machinery 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.

We've seen that L.B. Foster currently trades on a lower than expected P/S since its forecast growth is in line with 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for L.B. Foster you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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