Positive Sentiment Still Eludes ARB IOT Group Limited (NASDAQ:ARBB) Following 40% Share Price Slump

Unfortunately for some shareholders, the ARB IOT Group Limited (NASDAQ:ARBB) share price has dived 40% in the last thirty days, prolonging recent pain. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Since its price has dipped substantially, ARB IOT Group may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the IT industry in the United States have P/S ratios greater than 1.4x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for ARB IOT Group

How ARB IOT Group Has Been Performing

While the industry has experienced revenue growth lately, ARB IOT Group's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. 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 ARB IOT Group's 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 ARB IOT Group?

ARB IOT Group's 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 45%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 29% over the next year. That's shaping up to be materially higher than the 9.3% growth forecast for the broader industry.

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

The Key Takeaway

ARB IOT Group's recently weak share price has pulled its P/S back below other IT companies. 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.

ARB IOT Group's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You should always think about risks. Case in point, we've spotted 3 warning signs for ARB IOT Group you should be aware of.

If you're unsure about the strength of ARB IOT Group's 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.