Advantage Solutions Inc. (NASDAQ:ADV) Might Not Be As Mispriced As It Looks After Plunging 33%

Unfortunately for some shareholders, the Advantage Solutions Inc. (NASDAQ:ADV) share price has dived 33% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 53% loss during that time.

Following the heavy fall in price, Advantage Solutions' price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Media industry in the United States, where around half of the companies have P/S ratios above 0.8x and even P/S above 3x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Advantage Solutions

How Has Advantage Solutions Performed Recently?

Advantage Solutions could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

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

Is There Any Revenue Growth Forecasted For Advantage Solutions?

Advantage Solutions' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.6%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 1.9% each year during the coming three years according to the two analysts following the company. With the industry predicted to deliver 2.9% growth each year, the company is positioned for a comparable revenue result.

With this information, we find it odd that Advantage Solutions is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Advantage Solutions' P/S

Advantage Solutions' recently weak share price has pulled its P/S back below other Media companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Advantage Solutions 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.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Advantage Solutions with six simple checks.

If you're unsure about the strength of Advantage Solutions' 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.