Take Care Before Diving Into The Deep End On APM Human Services International Limited (ASX:APM)

It's not a stretch to say that APM Human Services International Limited's (ASX:APM) price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" for companies in the Professional Services industry in Australia, where the median P/S ratio is around 1.5x. 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.

See our latest analysis for APM Human Services International

What Does APM Human Services International's Recent Performance Look Like?

APM Human Services International certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on APM Human Services International will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For APM Human Services International?

In order to justify its P/S ratio, APM Human Services International would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 76% last year. The strong recent performance means it was also able to grow revenue by 96% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 19% per annum as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.5% per annum, which is noticeably less attractive.

With this in consideration, we find it intriguing that APM Human Services International's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does APM Human Services International'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.

Despite enticing revenue growth figures that outpace the industry, APM Human Services International's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 2 warning signs for APM Human Services International that you need to take into consideration.

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.