What You Can Learn From Perma-Fix Environmental Services, Inc.'s (NASDAQ:PESI) P/S After Its 25% Share Price Crash

Unfortunately for some shareholders, the Perma-Fix Environmental Services, Inc. (NASDAQ:PESI) share price has dived 25% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 12% share price drop.

In spite of the heavy fall in price, when almost half of the companies in the United States' Commercial Services industry have price-to-sales ratios (or "P/S") below 1.2x, you may still consider Perma-Fix Environmental Services as a stock probably not worth researching with its 2.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Perma-Fix Environmental Services

What Does Perma-Fix Environmental Services' Recent Performance Look Like?

Perma-Fix Environmental Services 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. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Perma-Fix Environmental Services will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Perma-Fix Environmental Services?

In order to justify its P/S ratio, Perma-Fix Environmental Services would need to produce impressive growth in excess of 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 20%. As a result, revenue from three years ago have also fallen 20% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 12% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 8.1%, the company is positioned for a stronger revenue result.

With this information, we can see why Perma-Fix Environmental Services is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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

Despite the recent share price weakness, Perma-Fix Environmental Services' P/S remains higher than most other companies in the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Perma-Fix Environmental Services shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 1 warning sign for Perma-Fix Environmental Services you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.