Investors Don't See Light At End Of BrightView Holdings, Inc.'s (NYSE:BV) Tunnel

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 1.4x 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 BrightView Holdings

What Does BrightView Holdings' Recent Performance Look Like?

BrightView Holdings 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.

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Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 12% overall rise in revenue. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 0.4% over the next year. With the industry predicted to deliver 7.1% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that BrightView Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of BrightView Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware BrightView Holdings is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on BrightView Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.