Greenidge Generation Holdings Inc.'s (NASDAQ:GREE) Low P/S No Reason For Excitement

You may think that with a price-to-sales (or "P/S") ratio of 0.3x Greenidge Generation Holdings Inc. (NASDAQ:GREE) is definitely a stock worth checking out, seeing as almost half of all the Software companies in the United States have P/S ratios greater than 5.5x and even P/S above 13x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Greenidge Generation Holdings

What Does Greenidge Generation Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Greenidge Generation Holdings' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Greenidge Generation Holdings' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Greenidge Generation Holdings' is when the company's growth is on track to lag the industry decidedly.

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 3.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 6.9% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 9.3% during the coming year according to the only analyst following the company. Meanwhile, the broader industry is forecast to expand by 27%, which paints a poor picture.

With this in consideration, we find it intriguing that Greenidge Generation Holdings' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Greenidge Generation Holdings' P/S

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Greenidge Generation Holdings' P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 7 warning signs for Greenidge Generation Holdings (4 don't sit too well with us!) that you should be aware of.

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.