Tenable Holdings, Inc.'s (NASDAQ:TENB) Prospects Need A Boost To Lift Shares

With a price-to-sales (or "P/S") ratio of 3.9x Tenable Holdings, Inc. (NASDAQ:TENB) may be sending bullish signals at the moment, given that almost half of all the Software companies in the United States have P/S ratios greater than 5.5x and even P/S higher than 12x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Tenable Holdings

How Has Tenable Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, Tenable Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 Tenable Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Tenable Holdings' Revenue Growth Trending?

Tenable Holdings' 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 11% last year. The latest three year period has also seen an excellent 55% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 8.8% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 37% per year growth forecast for the broader industry.

With this information, we can see why Tenable Holdings is trading at a P/S lower than the industry. 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 Tenable Holdings' P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Tenable Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

Having said that, be aware Tenable Holdings is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Tenable Holdings' 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.