Revenues Not Telling The Story For FiscalNote Holdings, Inc. (NYSE:NOTE) After Shares Rise 40%

Those holding FiscalNote Holdings, Inc. (NYSE:NOTE) shares would be relieved that the share price has rebounded 40% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Notwithstanding the latest gain, the annual share price return of 2.9% isn't as impressive.

Although its price has surged higher, it's still not a stretch to say that FiscalNote Holdings' price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Professional Services industry in the United States, where the median P/S ratio is around 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for FiscalNote Holdings

How FiscalNote Holdings Has Been Performing

FiscalNote Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on FiscalNote Holdings will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For FiscalNote Holdings?

FiscalNote Holdings' 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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.7%. Still, the latest three year period has seen an excellent 67% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 1.3% during the coming year according to the four analysts following the company. That's not great when the rest of the industry is expected to grow by 8.3%.

With this information, we find it concerning that FiscalNote Holdings is trading at a fairly similar P/S compared to the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Key Takeaway

FiscalNote Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

It appears that FiscalNote Holdings currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Plus, you should also learn about these 4 warning signs we've spotted with FiscalNote Holdings (including 1 which is concerning).

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.