Sentiment Still Eluding Hudson Global, Inc. (NASDAQ:HSON)

With a price-to-sales (or "P/S") ratio of 0.3x Hudson Global, Inc. (NASDAQ:HSON) may be sending bullish signals at the moment, given that almost half of all the Professional Services companies in the United States have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. 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 Hudson Global

How Has Hudson Global Performed Recently?

Hudson Global hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Hudson Global?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Hudson Global's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 21% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 13% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 6.9% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Hudson Global's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Hudson Global's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To us, it seems Hudson Global currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You always need to take note of risks, for example - Hudson Global has 1 warning sign we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.