Dun & Bradstreet Holdings, Inc.'s (NYSE:DNB) P/S Is On The Mark

With a median price-to-sales (or "P/S") ratio of close to 1.6x in the Professional Services industry in the United States, you could be forgiven for feeling indifferent about Dun & Bradstreet Holdings, Inc.'s (NYSE:DNB) P/S ratio of 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Dun & Bradstreet Holdings

How Has Dun & Bradstreet Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, Dun & Bradstreet Holdings has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Dun & Bradstreet Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Dun & Bradstreet Holdings' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.9% last year. Revenue has also lifted 27% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 5.3% each year as estimated by the nine analysts watching the company. With the industry predicted to deliver 7.0% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Dun & Bradstreet Holdings' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Dun & Bradstreet Holdings' P/S Mean For Investors?

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.

We've seen that Dun & Bradstreet Holdings maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Dun & Bradstreet Holdings (1 can't be ignored!) that you should be aware of before investing here.

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.

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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.

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