Take Care Before Diving Into The Deep End On The Manitowoc Company, Inc. (NYSE:MTW)

You may think that with a price-to-sales (or "P/S") ratio of 0.2x The Manitowoc Company, Inc. (NYSE:MTW) is a stock worth checking out, seeing as almost half of all the Machinery companies in the United States have P/S ratios greater than 1.6x 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.

Check out our latest analysis for Manitowoc Company

How Manitowoc Company Has Been Performing

With revenue growth that's inferior to most other companies of late, Manitowoc Company has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Manitowoc Company's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Manitowoc Company's Revenue Growth Trending?

Manitowoc Company'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.

If we review the last year of revenue growth, the company posted a worthy increase of 6.4%. The latest three year period has also seen an excellent 51% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 3.6% as estimated by the six analysts watching the company. With the industry only predicted to deliver 1.5%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Manitowoc Company's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Manitowoc Company's P/S Mean For Investors?

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.

To us, it seems Manitowoc Company currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about these 2 warning signs we've spotted with Manitowoc Company (including 1 which makes us a bit uncomfortable).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com