Positive Sentiment Still Eludes Priority Technology Holdings, Inc. (NASDAQ:PRTH) Following 27% Share Price Slump

The Priority Technology Holdings, Inc. (NASDAQ:PRTH) share price has fared very poorly over the last month, falling by a substantial 27%. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 136% in the last twelve months.

Following the heavy fall in price, Priority Technology Holdings' price-to-sales (or "P/S") ratio of 0.7x might make it look like a buy right now compared to the Diversified Financial industry in the United States, where around half of the companies have P/S ratios above 2.6x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Priority Technology Holdings

What Does Priority Technology Holdings' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Priority Technology Holdings has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 16%. Pleasingly, revenue has also lifted 71% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 11% as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 3.8% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Priority Technology Holdings' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Priority Technology Holdings' P/S Mean For Investors?

Priority Technology Holdings' P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Priority Technology Holdings' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 3 warning signs for Priority Technology Holdings (1 can't be ignored!) that we have uncovered.

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.