Revenues Working Against Upland Software, Inc.'s (NASDAQ:UPLD) Share Price Following 26% Dive

Unfortunately for some shareholders, the Upland Software, Inc. (NASDAQ:UPLD) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.

After such a large drop in price, Upland Software's price-to-sales (or "P/S") ratio of 0.2x might make it look like a strong buy right now compared to the wider Software industry in the United States, where around half of the companies have P/S ratios above 5x 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 highly reduced P/S.

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See our latest analysis for Upland Software

How Has Upland Software Performed Recently?

Upland Software hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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Do Revenue Forecasts Match The Low P/S Ratio?

Upland Software's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 8.2% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 13% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 19% over the next year. With the industry predicted to deliver 16% growth, that's a disappointing outcome.

In light of this, it's understandable that Upland Software's P/S would sit below the majority of other companies. 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 Upland Software's P/S

Shares in Upland Software have plummeted and its P/S has followed suit. 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 Upland Software's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Upland Software has 2 warning signs we think you should be aware of.

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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.