International Distributions Services plc's (LON:IDS) Share Price Matching Investor Opinion

With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Logistics industry in the United Kingdom, you could be forgiven for feeling indifferent about International Distributions Services plc's (LON:IDS) P/S ratio of 0.2x. 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 International Distributions Services

What Does International Distributions Services' Recent Performance Look Like?

Recent times have been more advantageous for International Distributions Services as its revenue hasn't fallen as much as the rest of the industry. One possibility is that the P/S ratio is moderate because investors think this relatively better revenue performance might be about to evaporate. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues outplaying the industry.

Keen to find out how analysts think International Distributions Services' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.3%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 6.4% 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 4.2% per annum during the coming three years according to the twelve analysts following the company. With the industry predicted to deliver 2.9% growth per annum, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that International Distributions Services' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look at International Distributions Services' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for International Distributions Services with six simple checks.

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.