Little Excitement Around Five9, Inc.'s (NASDAQ:FIVN) Revenues As Shares Take 27% Pounding

Unfortunately for some shareholders, the Five9, Inc. (NASDAQ:FIVN) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 53% loss during that time.

Since its price has dipped substantially, Five9's price-to-sales (or "P/S") ratio of 2.6x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.7x and even P/S above 11x are quite common. 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 Five9

How Five9 Has Been Performing

Five9's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on Five9 will be hoping that this isn't the case.

Want the full picture on analyst estimates for the company? Then our free report on Five9 will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

Five9'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. This was backed up an excellent period prior to see revenue up by 86% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 14% per annum over the next three years. With the industry predicted to deliver 18% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Five9'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.

What Does Five9's P/S Mean For Investors?

Five9's recently weak share price has pulled its P/S back below other Software companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Five9's analyst forecasts revealed that its inferior revenue outlook is contributing 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. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about these 2 warning signs we've spotted with Five9.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.