Revenues Not Telling The Story For MasTec, Inc. (NYSE:MTZ)

There wouldn't be many who think MasTec, Inc.'s (NYSE:MTZ) price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S for the Construction industry in the United States is similar at about 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for MasTec

How MasTec Has Been Performing

MasTec certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on MasTec will help you uncover what's on the horizon.

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

MasTec's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 37% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 83% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 5.6% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 8.3% each year, which is noticeably more attractive.

In light of this, it's curious that MasTec's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From MasTec's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Given that MasTec's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

You should always think about risks. Case in point, we've spotted 1 warning sign for MasTec you should be aware of.

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.