Diebold Nixdorf, Incorporated (NYSE:DBD) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.
In spite of the firm bounce in price, Diebold Nixdorf may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Tech industry in the United States have P/S ratios greater than 1x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Diebold Nixdorf
How Diebold Nixdorf Has Been Performing
Diebold Nixdorf certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. 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 Diebold Nixdorf will be hoping that this isn't the case and the company continues to beat out the industry.
How Is Diebold Nixdorf's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as low as Diebold Nixdorf's is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered a decent 4.0% gain to the company's revenues. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 6.5% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 3.0% over the next year. That's shaping up to be similar to the 4.0% growth forecast for the broader industry.
With this information, we find it odd that Diebold Nixdorf 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 Does Diebold Nixdorf's P/S Mean For Investors?
Despite Diebold Nixdorf's share price climbing recently, its P/S still lags most other companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've seen that Diebold Nixdorf 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. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Diebold Nixdorf, and understanding them should be part of your investment process.
If you're unsure about the strength of Diebold Nixdorf's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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