Ascent Industries Co. (NASDAQ:ACNT) Stock Catapults 29% Though Its Price And Business Still Lag The Industry

Ascent Industries Co. (NASDAQ:ACNT) shares have had a really impressive month, gaining 29% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 51%.

Even after such a large jump in price, Ascent Industries' price-to-sales (or "P/S") ratio of 0.7x might still make it look like a buy right now compared to the Metals and Mining industry in the United States, where around half of the companies have P/S ratios above 1.2x 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 Ascent Industries

What Does Ascent Industries' Recent Performance Look Like?

The recent revenue growth at Ascent Industries would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Ascent Industries will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Ascent Industries?

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

Retrospectively, the last year delivered a decent 6.6% gain to the company's revenues. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 40% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why Ascent Industries' P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

Ascent Industries' stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Ascent Industries confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

It is also worth noting that we have found 1 warning sign for Ascent Industries 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.