Those holding Aviat Networks, Inc. (NASDAQ:AVNW) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 47% in the last twelve months.

Even after such a large jump in price, given about half the companies operating in the United States' Communications industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Aviat Networks as an attractive investment with its 0.6x 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 Aviat Networks' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Aviat Networks has been doing relatively well. 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 potentially pick up some stock while it's out of favour.

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 Aviat Networks' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow revenue by 45% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 8.6% over the next year. Meanwhile, the rest of the industry is forecast to expand by 10%, which is not materially different.

With this information, we find it odd that Aviat Networks 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.

What We Can Learn From Aviat Networks' P/S?

The latest share price surge wasn't enough to lift Aviat Networks' P/S close to 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.

Our examination of Aviat Networks' 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. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 2 warning signs for Aviat Networks that you should be aware of.

If these risks are making you reconsider your opinion on Aviat Networks, 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.