Advantage Solutions Inc.'s (NASDAQ:ADV) Price Is Right But Growth Is Lacking

You may think that with a price-to-sales (or "P/S") ratio of 0.3x Advantage Solutions Inc. (NASDAQ:ADV) is a stock worth checking out, seeing as almost half of all the Media companies in the United States have P/S ratios greater than 0.8x and even P/S higher than 3x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out 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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Advantage Solutions' 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 Advantage Solutions?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 17% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 13% as estimated by the three analysts watching the company. That's not great when the rest of the industry is expected to grow by 4.3%.

With this in consideration, we find it intriguing that Advantage Solutions' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Advantage Solutions' P/S?

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.

As we suspected, our examination of Advantage Solutions' analyst forecasts revealed that its outlook for shrinking revenue 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. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Advantage Solutions that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.