Revenues Working Against GetBusy plc's (LON:GETB) Share Price

With a price-to-sales (or "P/S") ratio of 1.4x GetBusy plc (LON:GETB) may be sending bullish signals at the moment, given that almost half of all the Software companies in the United Kingdom have P/S ratios greater than 2.6x and even P/S higher than 6x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for GetBusy

How Has GetBusy Performed Recently?

GetBusy could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 GetBusy will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For GetBusy?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 2.8% last year. Pleasingly, revenue has also lifted 45% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 9.9% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 12%, which is noticeably more attractive.

In light of this, it's understandable that GetBusy's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does GetBusy's P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that GetBusy maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for GetBusy (3 shouldn't be ignored!) that you need to be mindful 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.