Conduent Incorporated (NASDAQ:CNDT) Stock Catapults 28% Though Its Price And Business Still Lag The Industry

Those holding Conduent Incorporated (NASDAQ:CNDT) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

In spite of the firm bounce in price, it would still be understandable if you think Conduent is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.1x, considering almost half the companies in the United States' Professional Services industry have P/S ratios above 1.2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

View our latest analysis for Conduent

What Does Conduent's Recent Performance Look Like?

Conduent could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

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

How Is Conduent's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Conduent'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 14%. This means it has also seen a slide in revenue over the longer-term as revenue is down 22% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 0.3% during the coming year according to the three analysts following the company. With the industry predicted to deliver 7.4% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Conduent's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

Despite Conduent's share price climbing recently, its P/S still lags most other companies. 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.

As expected, our analysis of Conduent's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

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

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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

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.