Steer Technologies Inc.'s (CVE:STER) Subdued P/S Might Signal An Opportunity

There wouldn't be many who think Steer Technologies Inc.'s (CVE:STER) price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S for the Transportation industry in Canada is similar at about 1.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Steer Technologies

What Does Steer Technologies' Recent Performance Look Like?

For instance, Steer Technologies' receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Steer Technologies, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Steer Technologies' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Steer Technologies' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 37% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

When compared to the industry's one-year growth forecast of 8.8%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Steer Technologies is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Steer Technologies' P/S?

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 Steer Technologies currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Steer Technologies (2 can't be ignored) you should be aware of.

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.

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.