Investors Give ADTRAN Holdings, Inc. (NASDAQ:ADTN) Shares A 33% Hiding

Unfortunately for some shareholders, the ADTRAN Holdings, Inc. (NASDAQ:ADTN) share price has dived 33% 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 42% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about ADTRAN Holdings' P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Communications industry in the United States is also close to 1.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for ADTRAN Holdings

How Has ADTRAN Holdings Performed Recently?

ADTRAN Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on ADTRAN Holdings.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like ADTRAN Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 82% last year. The strong recent performance means it was also able to grow revenue by 93% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 23% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.2% per year, which is noticeably less attractive.

With this information, we find it interesting that ADTRAN Holdings is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does ADTRAN Holdings' P/S Mean For Investors?

ADTRAN Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We've established that ADTRAN Holdings currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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

If these risks are making you reconsider your opinion on ADTRAN Holdings, 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.