Usio, Inc.'s (NASDAQ:USIO) Shares Not Telling The Full Story

Usio, Inc.'s (NASDAQ:USIO) price-to-sales (or "P/S") ratio of 0.5x 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 2.4x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Usio

What Does Usio's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Usio has been relatively sluggish. 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Usio would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 9.3% gain to the company's revenues. Pleasingly, revenue has also lifted 148% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 4.3%, which is noticeably less attractive.

In light of this, it's peculiar that Usio's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

To us, it seems Usio currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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

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