Insufficient Growth At Spectrum Brands Holdings, Inc. (NYSE:SPB) Hampers Share Price

Spectrum Brands Holdings, Inc.'s (NYSE:SPB) price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Household Products industry in the United States, where around half of the companies have P/S ratios above 1.8x 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.

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View our latest analysis for Spectrum Brands Holdings

How Spectrum Brands Holdings Has Been Performing

Spectrum Brands Holdings certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Spectrum Brands Holdings?

The only time you'd be truly comfortable seeing a P/S as low as Spectrum Brands Holdings' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 2.5% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 1.6% overall drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 0.06% each year as estimated by the seven analysts watching the company. That's shaping up to be materially lower than the 2.9% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Spectrum Brands Holdings' 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 Does Spectrum Brands Holdings' P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Spectrum Brands Holdings' 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. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Spectrum Brands Holdings has 1 warning sign we think you should be aware of.

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.