ScreenPro Security Inc.'s (CSE:SCRN) Low P/S No Reason For Excitement

With a price-to-sales (or "P/S") ratio of 0.1x ScreenPro Security Inc. (CSE:SCRN) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in Canada have P/S ratios greater than 13.3x and even P/S higher than 66x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for ScreenPro Security

How Has ScreenPro Security Performed Recently?

For example, consider that ScreenPro Security's financial performance has been pretty ordinary lately as revenue growth is non-existent. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. 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.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on ScreenPro Security will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For ScreenPro Security?

The only time you'd be truly comfortable seeing a P/S as depressed as ScreenPro Security's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

This is in contrast to the rest of the industry, which is expected to grow by 1,003% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why ScreenPro Security is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does ScreenPro Security's P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

In line with expectations, ScreenPro Security maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for ScreenPro Security that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.