Insufficient Growth At American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) Hampers Share Price

You may think that with a price-to-sales (or "P/S") ratio of 0.1x American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is a stock worth checking out, seeing as almost half of all the Auto Components companies in the United States have P/S ratios greater than 0.8x and even P/S higher than 3x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for American Axle & Manufacturing Holdings

How American Axle & Manufacturing Holdings Has Been Performing

Recent times haven't been great for American Axle & Manufacturing Holdings as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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 American Axle & Manufacturing Holdings will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For American Axle & Manufacturing Holdings?

In order to justify its P/S ratio, American Axle & Manufacturing Holdings would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.8%. The solid recent performance means it was also able to grow revenue by 29% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 1.1% per year as estimated by the nine analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 15% each year, which is noticeably more attractive.

With this information, we can see why American Axle & Manufacturing Holdings is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On American Axle & Manufacturing Holdings' 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.

As we suspected, our examination of American Axle & Manufacturing Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

Having said that, be aware American Axle & Manufacturing Holdings is showing 1 warning sign in our investment analysis, you should know about.

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.