Hyster-Yale Materials Handling, Inc. (NYSE:HY) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 50% in the last year.

Although its price has surged higher, Hyster-Yale Materials Handling may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Machinery industry in the United States have P/S ratios greater than 1.5x and even P/S higher than 4x 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.

How Hyster-Yale Materials Handling Has Been Performing

Hyster-Yale Materials Handling certainly has been doing a good job lately as it's been growing revenue more than most other companies. 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.

How Is Hyster-Yale Materials Handling's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Hyster-Yale Materials Handling's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. Pleasingly, revenue has also lifted 51% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 2.0% per year as estimated by the dual analysts watching the company. That's shaping up to be materially lower than the 5.4% each year growth forecast for the broader industry.

With this information, we can see why Hyster-Yale Materials Handling is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Hyster-Yale Materials Handling's P/S

Despite Hyster-Yale Materials Handling's 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.

As we suspected, our examination of Hyster-Yale Materials Handling's 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. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 3 warning signs for Hyster-Yale Materials Handling (1 is a bit concerning!) that we have uncovered.

If you're unsure about the strength of Hyster-Yale Materials Handling'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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