A Piece Of The Puzzle Missing From Fluor Corporation's (NYSE:FLR) Share Price

When close to half the companies operating in the Construction industry in the United States have price-to-sales ratios (or "P/S") above 1.2x, you may consider Fluor Corporation (NYSE:FLR) as an attractive investment with its 0.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Fluor

What Does Fluor's P/S Mean For Shareholders?

Fluor could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Fluor 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 Fluor's 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 4.9%. Revenue has also lifted 14% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 9.4% per annum during the coming three years according to the nine analysts following the company. That's shaping up to be similar to the 11% each year growth forecast for the broader industry.

In light of this, it's peculiar that Fluor's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

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.

It looks to us like the P/S figures for Fluor remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Fluor you should know about.

If these risks are making you reconsider your opinion on Fluor, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.