Take Care Before Jumping Onto Guardforce AI Co., Limited (NASDAQ:GFAI) Even Though It's 47% Cheaper

Guardforce AI Co., Limited (NASDAQ:GFAI) shareholders that were waiting for something to happen have been dealt a blow with a 47% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 71% share price decline.

After such a large drop in price, Guardforce AI's price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Commercial Services industry in the United States, where around half of the companies have P/S ratios above 1.4x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Guardforce AI

How Has Guardforce AI Performed Recently?

With revenue growth that's inferior to most other companies of late, Guardforce AI has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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?

Guardforce AI'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.

If we review the last year of revenue growth, the company posted a worthy increase of 6.8%. Still, lamentably revenue has fallen 3.6% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 7.5% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 7.2%, which is not materially different.

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

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

The southerly movements of Guardforce AI's shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It looks to us like the P/S figures for Guardforce AI remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Plus, you should also learn about these 3 warning signs we've spotted with Guardforce AI (including 2 which are a bit concerning).

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.