BrightView Holdings, Inc.'s (NYSE:BV) Shares Lagging The Industry But So Is The Business

BrightView Holdings, Inc.'s (NYSE:BV) price-to-sales (or "P/S") ratio of 0.5x 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 1.6x and even P/S above 5x 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.

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Check out our latest analysis for BrightView Holdings

What Does BrightView Holdings' P/S Mean For Shareholders?

BrightView Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For BrightView Holdings?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.0%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 1.2% over the next year. Meanwhile, the rest of the industry is forecast to expand by 6.7%, which is noticeably more attractive.

With this in consideration, its clear as to why BrightView Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From BrightView Holdings' 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.

As expected, our analysis of BrightView Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 3 warning signs for BrightView Holdings that you should be aware of.

If you're unsure about the strength of BrightView Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.