Synchronoss Technologies, Inc. (NASDAQ:SNCR) Looks Inexpensive After Falling 27% But Perhaps Not Attractive Enough

Synchronoss Technologies, Inc. (NASDAQ:SNCR) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 25% in that time.

Since its price has dipped substantially, Synchronoss Technologies may be sending very 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 Software industry in the United States have P/S ratios greater than 5x and even P/S higher than 11x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Synchronoss Technologies

How Synchronoss Technologies Has Been Performing

Recent times haven't been great for Synchronoss Technologies as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

How Is Synchronoss Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Synchronoss Technologies would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.6%. Still, lamentably revenue has fallen 38% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 1.8% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.

With this information, we can see why Synchronoss Technologies is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Synchronoss Technologies' P/S

Having almost fallen off a cliff, Synchronoss Technologies' share price has pulled its P/S way down as well. 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.

As we suspected, our examination of Synchronoss Technologies' 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for Synchronoss Technologies (1 is concerning!) that we have uncovered.

If these risks are making you reconsider your opinion on Synchronoss Technologies, 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.