JELD-WEN Holding, Inc.'s (NYSE:JELD) 28% Dip In Price Shows Sentiment Is Matching Revenues

The JELD-WEN Holding, Inc. (NYSE:JELD) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 69% loss during that time.

Since its price has dipped substantially, JELD-WEN Holding's price-to-sales (or "P/S") ratio of 0.1x might make it look like a buy right now compared to the Building industry in the United States, where around half of the companies have P/S ratios above 1.9x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for JELD-WEN Holding

How JELD-WEN Holding Has Been Performing

While the industry has experienced revenue growth lately, JELD-WEN Holding's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor 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.

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How Is JELD-WEN Holding's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as JELD-WEN Holding's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. As a result, revenue from three years ago have also fallen 26% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 4.4% during the coming year according to the seven analysts following the company. Meanwhile, the broader industry is forecast to expand by 5.1%, which paints a poor picture.

With this information, we are not surprised that JELD-WEN Holding is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On JELD-WEN Holding's P/S

JELD-WEN Holding's P/S has taken a dip along with its share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It's clear to see that JELD-WEN Holding maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for JELD-WEN Holding that you should be aware of.

If you're unsure about the strength of JELD-WEN Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.