Revenues Working Against CommScope Holding Company, Inc.'s (NASDAQ:COMM) Share Price Following 28% Dive

The CommScope Holding Company, Inc. (NASDAQ:COMM) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 118% in the last twelve months.

After such a large drop 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 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.

See our latest analysis for CommScope Holding Company

What Does CommScope Holding Company's P/S Mean For Shareholders?

Recent times have been advantageous for CommScope Holding Company as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 out of favour.

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

How Is CommScope Holding Company's Revenue Growth Trending?

CommScope Holding Company's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. Still, revenue has fallen 39% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 9.1% during the coming year according to the eight analysts following the company. With the industry predicted to deliver 10% growth, that's a disappointing outcome.

With this information, we are not surprised that CommScope Holding Company is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

The southerly movements of CommScope Holding Company's shares means its P/S is now sitting at a pretty low level. 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.

It's clear to see that CommScope Holding Company maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Having said that, be aware CommScope Holding Company is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.