Market Participants Recognise MasTec, Inc.'s (NYSE:MTZ) Revenues

There wouldn't be many who think MasTec, Inc.'s (NYSE:MTZ) price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S for the Construction industry in the United States is similar at about 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for MasTec

How Has MasTec Performed Recently?

With revenue growth that's inferior to most other companies of late, MasTec has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MasTec.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

If we review the last year of revenue growth, the company posted a worthy increase of 7.1%. Pleasingly, revenue has also lifted 54% 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 superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 9.8% each year over the next three years. With the industry predicted to deliver 11% growth per annum, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that MasTec's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On MasTec's P/S

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 seen that MasTec maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Having said that, be aware MasTec is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

If these risks are making you reconsider your opinion on MasTec, 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.