Revenues Working Against Altisource Portfolio Solutions S.A.'s (NASDAQ:ASPS) Share Price Following 25% Dive

Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) shares have had a horrible month, losing 25% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 7.3% in the last year.

Although its price has dipped substantially, Altisource Portfolio Solutions may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.6x, since almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 2.5x and even P/S higher than 10x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Altisource Portfolio Solutions

How Altisource Portfolio Solutions Has Been Performing

Revenue has risen firmly for Altisource Portfolio Solutions recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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 Altisource Portfolio Solutions will help you shine a light on its historical performance.

How Is Altisource Portfolio Solutions' Revenue Growth Trending?

In order to justify its P/S ratio, Altisource Portfolio Solutions would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. The latest three year period has also seen a 8.0% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 12% shows it's noticeably less attractive.

In light of this, it's understandable that Altisource Portfolio Solutions' P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Altisource Portfolio Solutions' P/S Mean For Investors?

Altisource Portfolio Solutions' recently weak share price has pulled its P/S back below other Real Estate companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Altisource Portfolio Solutions confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 4 warning signs we've spotted with Altisource Portfolio Solutions (including 3 which shouldn't be ignored).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.