American Public Education, Inc.'s (NASDAQ:APEI) Shares Bounce 26% But Its Business Still Trails The Industry

The American Public Education, Inc. (NASDAQ:APEI) share price has done very well over the last month, posting an excellent gain of 26%. The last month tops off a massive increase of 227% in the last year.

In spite of the firm bounce in price, when close to half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.5x, you may still consider American Public Education as an enticing stock to check out with its 0.5x 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.

View our latest analysis for American Public Education

How Has American Public Education Performed Recently?

Recent times haven't been great for American Public Education as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For American Public Education?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period has seen an excellent 84% overall rise in revenue, in spite of its uninspiring short-term performance. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 3.4% over the next year. With the industry predicted to deliver 13% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why American Public Education's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The latest share price surge wasn't enough to lift American Public Education's P/S close to the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of American Public Education's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware American Public Education is showing 1 warning sign in our investment analysis, you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.