Investors Aren't Entirely Convinced By Tantalus Systems Holding Inc.'s (TSE:GRID) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 1.7x Tantalus Systems Holding Inc. (TSE:GRID) is a stock worth checking out, seeing as almost half of all the Electronic companies in Canada have P/S ratios greater than 2.7x and even P/S higher than 8x 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 Tantalus Systems Holding

What Does Tantalus Systems Holding's P/S Mean For Shareholders?

Tantalus Systems Holding hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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 analyst estimates for the company? Then our free report on Tantalus Systems Holding will help you uncover what's on the horizon.

How Is Tantalus Systems Holding's Revenue Growth Trending?

In order to justify its P/S ratio, Tantalus Systems Holding would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.2%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 24% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the five analysts following the company. With the industry only predicted to deliver 13%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Tantalus Systems Holding's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

To us, it seems Tantalus Systems Holding currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware Tantalus Systems Holding is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Tantalus Systems Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.