There wouldn't be many who think Beacon Roofing Supply, Inc.'s (NASDAQ:BECN) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Trade Distributors industry in the United States is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does Beacon Roofing Supply's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Beacon Roofing Supply has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Is There Some Revenue Growth Forecasted For Beacon Roofing Supply?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Beacon Roofing Supply's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.9% last year. Revenue has also lifted 25% 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.

Looking ahead now, revenue is anticipated to climb by 4.8% during the coming year according to the analysts following the company. With the industry predicted to deliver 4.5% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Beacon Roofing Supply's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Beacon Roofing Supply's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at Beacon Roofing Supply's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - Beacon Roofing Supply has 1 warning sign we think you should be aware of.

If you're unsure about the strength of Beacon Roofing Supply's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.