Advantage Solutions Inc. (NASDAQ:ADV) shareholders would be excited to see that the share price has had a great month, posting a 53% gain and recovering from prior weakness. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, Advantage Solutions may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Media industry in the United States have P/S ratios greater than 0.9x and even P/S higher than 3x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Advantage Solutions

How Advantage Solutions Has Been Performing

Recent times have been advantageous for Advantage Solutions as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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.

Is There Any Revenue Growth Forecasted For Advantage Solutions?

In order to justify its P/S ratio, Advantage Solutions would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.7%. Revenue has also lifted 28% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 2.2% over the next year. Meanwhile, the rest of the industry is forecast to expand by 33%, which is noticeably more attractive.

In light of this, it's understandable that Advantage Solutions' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Advantage Solutions' P/S Mean For Investors?

Advantage Solutions' stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Advantage Solutions' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Advantage Solutions.

If these risks are making you reconsider your opinion on Advantage Solutions, 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.