Improved Revenues Required Before Guardforce AI Co., Limited (NASDAQ:GFAI) Stock's 27% Jump Looks Justified

Despite an already strong run, Guardforce AI Co., Limited (NASDAQ:GFAI) shares have been powering on, with a gain of 27% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 38% in the last twelve months.

Although its price has surged higher, Guardforce AI may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Commercial Services industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Guardforce AI

What Does Guardforce AI's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Guardforce AI has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Guardforce AI?

The only time you'd be truly comfortable seeing a P/S as low as Guardforce AI's is when the company's growth is on track to lag the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. Therefore, it's fair to say that revenue growth has definitely eluded the company recently.

Turning to the outlook, the next year should generate growth of 3.6% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 7.6%, which is noticeably more attractive.

In light of this, it's understandable that Guardforce AI'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.

The Key Takeaway

The latest share price surge wasn't enough to lift Guardforce AI's P/S close to the industry median. 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.

As we suspected, our examination of Guardforce AI's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Guardforce AI (2 don't sit too well with us) 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).

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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.