There Is A Reason American Axle & Manufacturing Holdings, Inc.'s (NYSE:AXL) Price Is Undemanding

When close to half the companies operating in the Auto Components industry in the United States have price-to-sales ratios (or "P/S") above 0.7x, you may consider American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) as an attractive investment with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for American Axle & Manufacturing Holdings

How American Axle & Manufacturing Holdings Has Been Performing

American Axle & Manufacturing Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially 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.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as American Axle & Manufacturing Holdings' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.7%. Revenue has also lifted 29% 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 actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 0.7% during the coming year according to the nine analysts following the company. That's shaping up to be materially lower than the 7.2% growth forecast for the broader industry.

With this in consideration, its clear as to why American Axle & Manufacturing Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that American Axle & Manufacturing Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 1 warning sign for American Axle & Manufacturing Holdings 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.