Insufficient Growth At Beam Communications Holdings Limited (ASX:BCC) Hampers Share Price

With a price-to-sales (or "P/S") ratio of 0.5x Beam Communications Holdings Limited (ASX:BCC) may be sending bullish signals at the moment, given that almost half of all the Communications companies in Australia have P/S ratios greater than 1.6x 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.

See our latest analysis for Beam Communications Holdings

How Has Beam Communications Holdings Performed Recently?

Beam Communications Holdings 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.

Keen to find out how analysts think Beam Communications Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Beam Communications Holdings?

The only time you'd be truly comfortable seeing a P/S as low as Beam Communications Holdings' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 67% gain to the company's top line. The latest three year period has also seen an excellent 165% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 5.4% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 10%, which is noticeably more attractive.

With this in consideration, its clear as to why Beam Communications Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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.

We've established that Beam Communications Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Beam Communications Holdings is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Beam Communications Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.