Little Excitement Around Hillenbrand, Inc.'s (NYSE:HI) Revenues As Shares Take 27% Pounding

Hillenbrand, Inc. (NYSE:HI) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

Since its price has dipped substantially, Hillenbrand may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.6x, considering almost half of all companies in the Machinery industry in the United States have P/S ratios greater than 1.4x and even P/S higher than 4x 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 Hillenbrand

How Hillenbrand Has Been Performing

Hillenbrand certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. 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 Hillenbrand will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Hillenbrand?

In order to justify its P/S ratio, Hillenbrand would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 5.9% gain to the company's revenues. Revenue has also lifted 14% 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.

Shifting to the future, estimates from the five analysts covering the company are not good at all, suggesting revenue should decline by 15% over the next year. Meanwhile, the broader industry is forecast to moderate by 0.8%, which indicates the company should perform poorly indeed.

With this information, it's not too hard to see why Hillenbrand is trading at a lower P/S in comparison. However, when revenue shrink rapidly the P/S often shrinks too, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Key Takeaway

The southerly movements of Hillenbrand's shares means its P/S is now sitting at a pretty low level. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Hillenbrand's P/S is about what we expect, seeing as the P/S and revenue growth forecasts are lower than that of an already struggling industry. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Although, we would be concerned whether the company can even maintain this level of performance under these tough industry conditions. For now though, it's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Hillenbrand (including 1 which shouldn't be ignored).

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.