PowerFleet, Inc.'s (NASDAQ:PWFL) 28% Dip In Price Shows Sentiment Is Matching Revenues

PowerFleet, Inc. (NASDAQ:PWFL) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 34% in that time.

Following the heavy fall in price, PowerFleet may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.6x, 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.

View our latest analysis for PowerFleet

How PowerFleet Has Been Performing

Recent times haven't been great for PowerFleet as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 PowerFleet.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as PowerFleet's is when the company's growth is on track to lag the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period was better as it's delivered a decent 22% overall rise in revenue. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 7.5% over the next year. With the industry predicted to deliver 11% growth, the company is positioned for a weaker revenue result.

With this information, we can see why PowerFleet is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does PowerFleet's P/S Mean For Investors?

PowerFleet's recently weak share price has pulled its P/S back below other Electronic companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of PowerFleet's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for PowerFleet that you should be aware of.

If these risks are making you reconsider your opinion on PowerFleet, 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.