WW International, Inc.'s (NASDAQ:WW) Low P/S No Reason For Excitement

When close to half the companies operating in the Consumer Services industry in the United States have price-to-sales ratios (or "P/S") above 1.5x, you may consider WW International, Inc. (NASDAQ:WW) as an attractive investment with its 0.7x 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.

See our latest analysis for WW International

How WW International Has Been Performing

While the industry has experienced revenue growth lately, WW International's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think WW International's future stacks up against the industry? In that case, our free report is a great place to start.

How Is WW International's Revenue Growth Trending?

WW International's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. 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 7.4% each year during the coming three years according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 16% per year, which is noticeably more attractive.

With this in consideration, its clear as to why WW International'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.

What We Can Learn From WW International's P/S?

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 we suspected, our examination of WW International's analyst forecasts revealed that its inferior revenue outlook is contributing 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. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 4 warning signs for WW International (1 is significant!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.