Lacklustre Performance Is Driving Quad/Graphics, Inc.'s (NYSE:QUAD) 28% Price Drop

The Quad/Graphics, Inc. (NYSE:QUAD) share price has fared very poorly over the last month, falling by a substantial 28%. The last month has meant the stock is now only up 8.3% during the last year.

After such a large drop in price, Quad/Graphics may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Commercial Services industry in the United States have P/S ratios greater than 1.2x and even P/S higher than 4x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Quad/Graphics

What Does Quad/Graphics' Recent Performance Look Like?

Quad/Graphics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Quad/Graphics?

The only time you'd be truly comfortable seeing a P/S as low as Quad/Graphics' 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 9.7%. The last three years don't look nice either as the company has shrunk revenue by 9.7% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue growth is heading into negative territory, declining 9.1% over the next year. With the industry predicted to deliver 8.2% growth, that's a disappointing outcome.

In light of this, it's understandable that Quad/Graphics' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On Quad/Graphics' P/S

Quad/Graphics' recently weak share price has pulled its P/S back below other Commercial Services companies. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Quad/Graphics' P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Quad/Graphics that you need to be mindful of.

If these risks are making you reconsider your opinion on Quad/Graphics, 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.