Positive Sentiment Still Eludes ADDvantage Technologies Group, Inc. (NASDAQ:AEY) Following 30% Share Price Slump

The ADDvantage Technologies Group, Inc. (NASDAQ:AEY) share price has fared very poorly over the last month, falling by a substantial 30%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 87% loss during that time.

After such a large drop in price, ADDvantage Technologies Group may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Electronic industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 5x 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 limited.

Check out our latest analysis for ADDvantage Technologies Group

What Does ADDvantage Technologies Group's Recent Performance Look Like?

For example, consider that ADDvantage Technologies Group's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on ADDvantage Technologies Group will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on ADDvantage Technologies Group's earnings, revenue and cash flow.

How Is ADDvantage Technologies Group's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like ADDvantage Technologies Group's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 20% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 30% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 7.1% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that ADDvantage Technologies Group is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

What Does ADDvantage Technologies Group's P/S Mean For Investors?

ADDvantage Technologies Group's P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

The fact that ADDvantage Technologies Group currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Having said that, be aware ADDvantage Technologies Group is showing 4 warning signs in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.