Perma-Fix Environmental Services, Inc. (NASDAQ:PESI) Could Be Riskier Than It Looks

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Commercial Services industry in the United States, you could be forgiven for feeling indifferent about Perma-Fix Environmental Services, Inc.'s (NASDAQ:PESI) P/S ratio of 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Perma-Fix Environmental Services

What Does Perma-Fix Environmental Services' P/S Mean For Shareholders?

Perma-Fix Environmental Services certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Perma-Fix Environmental Services.

How Is Perma-Fix Environmental Services' Revenue Growth Trending?

Perma-Fix Environmental Services' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 16% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 15% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 10%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Perma-Fix Environmental Services' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Perma-Fix Environmental Services' P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Looking at Perma-Fix Environmental Services' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Perma-Fix Environmental Services, and understanding them should be part of your investment process.

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.