Investors Aren't Entirely Convinced By Straker Translations Limited's (ASX:STG) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 0.7x Straker Translations Limited (ASX:STG) is a stock worth checking out, seeing as almost half of all the Commercial Services companies in Australia have P/S ratios greater than 2.1x and even P/S higher than 5x 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 Straker Translations

How Has Straker Translations Performed Recently?

Recent times haven't been great for Straker Translations as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Straker Translations will help you uncover what's on the horizon.

How Is Straker Translations' Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 6.3% gain to the company's revenues. Pleasingly, revenue has also lifted 114% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 9.0% each year during the coming three years according to the lone analyst following the company. That's shaping up to be similar to the 8.5% per year growth forecast for the broader industry.

With this information, we find it odd that Straker Translations is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Straker Translations remain low despite growth that is expected to be in line with other companies in the 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 is also worth noting that we have found 1 warning sign for Straker Translations that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.