Take Care Before Diving Into The Deep End On Spectrum Brands Holdings, Inc. (NYSE:SPB)

With a price-to-sales (or "P/S") ratio of 0.8x Spectrum Brands Holdings, Inc. (NYSE:SPB) may be sending bullish signals at the moment, given that almost half of all the Household Products companies in the United States have P/S ratios greater than 1.5x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Spectrum Brands Holdings

How Has Spectrum Brands Holdings Performed Recently?

There hasn't been much to differentiate Spectrum Brands Holdings' and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Spectrum Brands Holdings.

How Is Spectrum Brands Holdings' Revenue Growth Trending?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. This isn't what shareholders were looking for as it means they've been left with a 1.1% decline in revenue over the last three years in total. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 1.5% per year as estimated by the nine analysts watching the company. With the industry predicted to deliver 3.0% growth per year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Spectrum Brands Holdings' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Spectrum Brands Holdings' P/S Mean For Investors?

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.

We've seen that Spectrum Brands Holdings currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

You should always think about risks. Case in point, we've spotted 1 warning sign for Spectrum Brands Holdings you should be aware of.

If you're unsure about the strength of Spectrum Brands Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.