Data Storage Corporation (NASDAQ:DTST) Shares Slammed 37% But Getting In Cheap Might Be Difficult Regardless

Data Storage Corporation (NASDAQ:DTST) shares have retraced a considerable 37% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 161%.

Even after such a large drop in price, it's still not a stretch to say that Data Storage's price-to-sales (or "P/S") ratio of 1.3x right now seems quite "middle-of-the-road" compared to the IT industry in the United States, where the median P/S ratio is around 1.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Data Storage

How Data Storage Has Been Performing

Recent times haven't been great for Data Storage as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Data Storage?

In order to justify its P/S ratio, Data Storage would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 4.6% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 168% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 8.2% during the coming year according to the only analyst following the company. That's shaping up to be similar to the 9.3% growth forecast for the broader industry.

With this information, we can see why Data Storage is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Data Storage's P/S Mean For Investors?

Following Data Storage's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Data Storage maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Having said that, be aware Data Storage is showing 2 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Data Storage, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.