NTAW Holdings Limited (ASX:NTD) Surges 38% Yet Its Low P/S Is No Reason For Excitement

Despite an already strong run, NTAW Holdings Limited (ASX:NTD) shares have been powering on, with a gain of 38% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Although its price has surged higher, NTAW Holdings' price-to-sales (or "P/S") ratio of 0.1x might still make it look like a buy right now compared to the Retail Distributors industry in Australia, where around half of the companies have P/S ratios above 0.8x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for NTAW Holdings

What Does NTAW Holdings' P/S Mean For Shareholders?

It looks like revenue growth has deserted NTAW Holdings recently, which is not something to boast about. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely underperform the broader industry in the near future. Those who are bullish on NTAW Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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Is There Any Revenue Growth Forecasted For NTAW Holdings?

NTAW Holdings' 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 virtually the same number to the company's top line as the year before. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 3.1% drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 13% shows it's an unpleasant look.

With this information, we are not surprised that NTAW Holdings is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What We Can Learn From NTAW Holdings' P/S?

NTAW Holdings' stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that NTAW Holdings maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for NTAW Holdings (2 can't be ignored!) that we have uncovered.

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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.