Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) shares have had a really impressive month, gaining 26% after a shaky period beforehand.    The last month tops off a massive increase of 108% in the last year.  

In spite of the firm bounce in price, it would still be understandable if you think Universal Stainless & Alloy Products is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.5x, considering almost half the companies in the United States' Metals and Mining industry have P/S ratios above 1.1x.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.  

Check out our latest analysis for Universal Stainless & Alloy Products

NasdaqGS:USAP Price to Sales Ratio vs Industry November 5th 2023

How Has Universal Stainless & Alloy Products Performed Recently?

Recent times have been pleasing for Universal Stainless & Alloy Products as its revenue has risen in spite of the industry's average revenue going into reverse.   One possibility is that the P/S ratio is low because investors think the company's revenue is going to fall away like everyone else's soon.  Those who are bullish on Universal Stainless & Alloy Products will be hoping that this isn't the case and the company continues to beat out the industry.    

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Universal Stainless & Alloy Products.

Do Revenue Forecasts Match The Low P/S Ratio?  

Universal Stainless & Alloy Products' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.  

Taking a look back first, we see that the company grew revenue by an impressive 39% last year.    As a result, it also grew revenue by 29% in total over the last three years.  So we can start by confirming that the company has actually done a good job of growing revenue over that time.  

Looking ahead now, revenue is anticipated to climb by 10% during the coming year according to the one analyst following the company.  With the industry only predicted to deliver 5.4%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Universal Stainless & Alloy Products' P/S sits below the majority of other companies.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

What Does Universal Stainless & Alloy Products' P/S Mean For Investors?

Despite Universal Stainless & Alloy Products' share price climbing recently, its P/S still lags most other companies.      It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Universal Stainless & Alloy Products currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.    

Plus, you should also learn about this   1 warning sign we've spotted with Universal Stainless & Alloy Products.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.