Little Excitement Around Advantage Solutions Inc.'s (NASDAQ:ADV) Revenues As Shares Take 26% Pounding

Advantage Solutions Inc. (NASDAQ:ADV) shares have had a horrible month, losing 26% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 82%, which is great even in a bull market.

Following the heavy fall in price, considering around half the companies operating in the United States' Media industry have price-to-sales ratios (or "P/S") above 1x, you may consider Advantage Solutions as an solid investment opportunity with its 0.3x P/S ratio. 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

What Does Advantage Solutions' P/S Mean For Shareholders?

Recent times haven't been great for Advantage Solutions as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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.

How Is Advantage Solutions' Revenue Growth Trending?

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

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 36% overall rise in revenue, in spite of its uninspiring short-term performance. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 9.5% over the next year. Meanwhile, the broader industry is forecast to expand by 4.6%, which paints a poor picture.

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?

The southerly movements of Advantage Solutions' shares means its P/S is now sitting at a pretty low level. 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.

It's clear to see that Advantage Solutions maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Before you settle on your opinion, 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.