Investors Aren't Buying American Strategic Investment Co.'s (NYSE:NYC) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 0.3x American Strategic Investment Co. (NYSE:NYC) is a stock worth checking out, seeing as almost half of all the Real Estate companies in the United States have P/S ratios greater than 2x and even P/S higher than 14x 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.

See our latest analysis for American Strategic Investment

How American Strategic Investment Has Been Performing

American Strategic Investment hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. 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.

Want the full picture on analyst estimates for the company? Then our free report on American Strategic Investment will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, American Strategic Investment would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 10.0% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 2.3% over the next year. With the industry predicted to deliver 7.2% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why American Strategic Investment's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

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 expected, our analysis of American Strategic Investment's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 4 warning signs for American Strategic Investment (of which 2 make us uncomfortable!) you should know about.

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.