The Market Doesn't Like What It Sees From One Stop Systems, Inc.'s (NASDAQ:OSS) Revenues Yet As Shares Tumble 26%

To the annoyance of some shareholders, One Stop Systems, Inc. (NASDAQ:OSS) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 27% share price drop.

Following the heavy fall in price, One Stop Systems may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Tech industry in the United States have P/S ratios greater than 1.5x and even P/S higher than 6x aren't out of the ordinary. 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 One Stop Systems

What Does One Stop Systems' Recent Performance Look Like?

While the industry has experienced revenue growth lately, One Stop Systems' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on One Stop Systems will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For One Stop Systems?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 21%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 9.5% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 3.6% over the next year. With the industry predicted to deliver 6.0% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that One Stop Systems' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From One Stop Systems' P/S?

One Stop Systems' P/S has taken a dip along with its share price. 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.

We've established that One Stop Systems maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 4 warning signs for One Stop Systems that you need to be mindful of.

If these risks are making you reconsider your opinion on One Stop Systems, 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.