Unifi, Inc.'s (NYSE:UFI) P/S Still Appears To Be Reasonable

There wouldn't be many who think Unifi, Inc.'s (NYSE:UFI) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Luxury industry in the United States is similar at about 0.5x. 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.

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See our latest analysis for Unifi

How Unifi Has Been Performing

There hasn't been much to differentiate Unifi's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Unifi will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 25% drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.1% during the coming year according to the one analyst following the company. With the industry predicted to deliver 4.7% growth , the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Unifi's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

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.

We've seen that Unifi maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. 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.

You should always think about risks. Case in point, we've spotted 2 warning signs for Unifi you should be aware of, and 1 of them can't be ignored.

If these risks are making you reconsider your opinion on Unifi, 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.