Market Might Still Lack Some Conviction On CommScope Holding Company, Inc. (NASDAQ:COMM) Even After 58% Share Price Boost

CommScope Holding Company, Inc. (NASDAQ:COMM) shares have continued their recent momentum with a 58% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 50% in the last year.

In spite of the firm bounce in price, considering around half the companies operating in the United States' Communications industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider CommScope Holding Company as an solid investment opportunity with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for CommScope Holding Company

What Does CommScope Holding Company's Recent Performance Look Like?

CommScope Holding Company 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. 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 CommScope Holding Company's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, CommScope Holding Company would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 19%. As a result, revenue from three years ago have also fallen 41% overall. 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 6.8% as estimated by the eight analysts watching the company. With the industry predicted to deliver 8.1% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that CommScope Holding Company's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On CommScope Holding Company's P/S

The latest share price surge wasn't enough to lift CommScope Holding Company's P/S close to the industry median. 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.

It looks to us like the P/S figures for CommScope Holding Company remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 3 warning signs for CommScope Holding Company (2 are potentially serious!) that we have uncovered.

If these risks are making you reconsider your opinion on CommScope Holding Company, 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.