Even With A 35% Surge, Cautious Investors Are Not Rewarding RF Industries, Ltd.'s (NASDAQ:RFIL) Performance Completely

The RF Industries, Ltd. (NASDAQ:RFIL) share price has done very well over the last month, posting an excellent gain of 35%. Unfortunately, despite the strong performance over the last month, the full year gain of 4.4% isn't as attractive.

Even after such a large jump in price, RF Industries' price-to-sales (or "P/S") ratio of 0.7x might still make it look like a buy right now compared to the Electronic industry in the United States, where around half of the companies have P/S ratios above 1.9x and even P/S above 4x are quite common. 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 RF Industries

How RF Industries Has Been Performing

RF Industries has been struggling lately as its revenue has declined faster than most other companies. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. 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 RF Industries' 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 RF Industries?

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

Retrospectively, the last year delivered a frustrating 30% decrease to the company's top line. Still, the latest three year period has seen an excellent 48% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 14% over the next year. That's shaping up to be materially higher than the 7.3% growth forecast for the broader industry.

In light of this, it's peculiar that RF Industries' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does RF Industries' P/S Mean For Investors?

The latest share price surge wasn't enough to lift RF Industries' P/S close to the industry median. 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.

A look at RF Industries' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for RF Industries that you need to be mindful of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com