Take Care Before Diving Into The Deep End On Digital Ally, Inc. (NASDAQ:DGLY)

With a price-to-sales (or "P/S") ratio of 0.2x Digital Ally, Inc. (NASDAQ:DGLY) may be sending bullish signals at the moment, given that almost half of all the Electronic companies in the United States have P/S ratios greater than 1.9x and even P/S higher than 5x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Digital Ally

What Does Digital Ally's Recent Performance Look Like?

Recent times haven't been great for Digital Ally as its revenue has been falling quicker than most other companies. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Digital Ally's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Digital Ally?

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

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 207% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 6.0% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 6.7%, which is not materially different.

With this information, we find it odd that Digital Ally is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

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 looks to us like the P/S figures for Digital Ally remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 4 warning signs for Digital Ally (2 make us uncomfortable!) that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.