Forrester Research, Inc. (NASDAQ:FORR) Not Doing Enough For Some Investors As Its Shares Slump 27%

Unfortunately for some shareholders, the Forrester Research, Inc. (NASDAQ:FORR) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 54% loss during that time.

Since its price has dipped substantially, Forrester Research may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Professional Services industry in the United States have P/S ratios greater than 1.3x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Forrester Research

How Has Forrester Research Performed Recently?

Forrester Research 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Forrester Research's Revenue Growth Trending?

Forrester Research'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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 10%. The last three years don't look nice either as the company has shrunk revenue by 13% in aggregate. 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 year should bring diminished returns, with revenue decreasing 2.8% as estimated by the three analysts watching the company. Meanwhile, the broader industry is forecast to expand by 7.0%, which paints a poor picture.

With this in consideration, we find it intriguing that Forrester Research's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Forrester Research's P/S?

Forrester Research's recently weak share price has pulled its P/S back below other Professional Services companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's clear to see that Forrester Research maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Forrester Research's poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Forrester Research with six simple checks on some of these key factors.

If you're unsure about the strength of Forrester Research's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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