VOXX International Corporation's (NASDAQ:VOXX) Price Is Right But Growth Is Lacking After Shares Rocket 71%

VOXX International Corporation (NASDAQ:VOXX) shares have had a really impressive month, gaining 71% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 45% in the last twelve months.

Even after such a large jump in price, when close to half the companies operating in the United States' Consumer Durables industry have price-to-sales ratios (or "P/S") above 0.8x, you may still consider VOXX International as an enticing stock to check out with its 0.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for VOXX International

How VOXX International Has Been Performing

For instance, VOXX International's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on VOXX International will help you shine a light on its historical performance.

How Is VOXX International's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. This means it has also seen a slide in revenue over the longer-term as revenue is down 29% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 5.5% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that VOXX International's 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 recent revenue trends are already weighing down the shares.

The Final Word

The latest share price surge wasn't enough to lift VOXX International's P/S close to the industry median. 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.

Our examination of VOXX International 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 4 warning signs for VOXX International (of which 3 shouldn't be ignored!) you should know about.

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.