Investors Give Conduent Incorporated (NASDAQ:CNDT) Shares A 29% Hiding

To the annoyance of some shareholders, Conduent Incorporated (NASDAQ:CNDT) shares are down a considerable 29% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.

Following the heavy fall in price, given about half the companies operating in the United States' Professional Services industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider Conduent as an attractive investment with its 0.1x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Conduent

What Does Conduent's P/S Mean For Shareholders?

Conduent could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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.

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

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

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

Retrospectively, the last year delivered a frustrating 9.8% decrease to the company's top line. As a result, revenue from three years ago have also fallen 19% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 7.0% per year as estimated by the three analysts watching the company. That's shaping up to be similar to the 7.1% each year growth forecast for the broader industry.

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

The Final Word

Conduent's recently weak share price has pulled its P/S back below other Professional Services companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Conduent's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Conduent that we have uncovered.

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).

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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.