Atmus Filtration Technologies Inc. (NYSE:ATMU) Investors Are Less Pessimistic Than Expected

There wouldn't be many who think Atmus Filtration Technologies Inc.'s (NYSE:ATMU) price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S for the Auto Components industry in the United States is similar at about 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Atmus Filtration Technologies

What Does Atmus Filtration Technologies' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Atmus Filtration Technologies has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Atmus Filtration Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Atmus Filtration Technologies would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.9% last year. This was backed up an excellent period prior to see revenue up by 31% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 1.0% during the coming year according to the six analysts following the company. Meanwhile, the broader industry is forecast to expand by 3.3%, which paints a poor picture.

With this in consideration, we think it doesn't make sense that Atmus Filtration Technologies' P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

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.

Our check of Atmus Filtration Technologies' analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Before you take the next step, you should know about the 1 warning sign for Atmus Filtration Technologies that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.