Investors Don't See Light At End Of Robert Walters plc's (LON:RWA) Tunnel

When close to half the companies operating in the Professional Services industry in the United Kingdom have price-to-sales ratios (or "P/S") above 1.2x, you may consider Robert Walters plc (LON:RWA) as an attractive investment with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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How Robert Walters Has Been Performing

Robert Walters could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Robert Walters.

How Is Robert Walters' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Robert Walters' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 14%. This means it has also seen a slide in revenue over the longer-term as revenue is down 20% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue growth is heading into negative territory, declining 6.8% over the next year. Meanwhile, the broader industry is forecast to expand by 6.8%, which paints a poor picture.

In light of this, it's understandable that Robert Walters' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Robert Walters' 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.

It's clear to see that Robert Walters maintains its low P/S on the weakness of its forecast for sliding revenue, 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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Robert Walters with six simple checks will allow you to discover any risks that could be an issue.

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

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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.