Lacklustre Performance Is Driving Forward Industries, Inc.'s (NASDAQ:FORD) 26% Price Drop

Unfortunately for some shareholders, the Forward Industries, Inc. (NASDAQ:FORD) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 60% share price decline.

After such a large drop in price, considering around half the companies operating in the United States' Luxury industry have price-to-sales ratios (or "P/S") above 0.8x, you may consider Forward Industries as an solid investment opportunity with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Forward Industries

How Has Forward Industries Performed Recently?

For instance, Forward Industries' receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Forward Industries' earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Forward Industries would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. The last three years don't look nice either as the company has shrunk revenue by 11% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 3.6% shows it's an unpleasant look.

With this in mind, we understand why Forward Industries' P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Bottom Line On Forward Industries' P/S

Forward Industries' recently weak share price has pulled its P/S back below other Luxury companies. 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.

Our examination of Forward Industries confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Forward Industries that you should be aware of.

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.