NN, Inc.'s (NASDAQ:NNBR) Shares Leap 31% Yet They're Still Not Telling The Full Story

NN, Inc. (NASDAQ:NNBR) shareholders are no doubt pleased to see that the share price has bounced 31% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 32% in the last twelve months.

Even after such a large jump in price, NN may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Machinery industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for NN

What Does NN's Recent Performance Look Like?

Recent times haven't been great for NN as its revenue has been falling quicker than most other companies. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to 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 NN will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

NN's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.9%. This means it has also seen a slide in revenue over the longer-term as revenue is down 3.3% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company are not great, suggesting revenue should decline by 0.3% over the next year. Although, this is simply shaping up to be in line with the broader industry, which is also set to decline 0.5%.

With this in consideration, we find it intriguing but understandable that NN's P/S falls short of its industry peers. With revenue going in reverse, it's not guaranteed that the P/S has found a floor yet. Even just maintaining these prices could be difficult to achieve as the weak outlook is already weighing down the shares heavily.

The Key Takeaway

Despite NN's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of NN's analyst forecasts revealed despite having an equally shaky outlook against the industry, its P/S much lower than we would have predicted. Even though the company's revenue outlook is on par, we assume potential risks are what might be placing downward pressure on the P/S ratio. Perhaps there is some hesitation about the company's ability to resist further pain to its business from the broader industry turmoil. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for NN you should know about.

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).

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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.