Xerox Holdings Corporation's (NASDAQ:XRX) Revenues Are Not Doing Enough For Some Investors

With a price-to-sales (or "P/S") ratio of 0.2x Xerox Holdings Corporation (NASDAQ:XRX) may be sending bullish signals at the moment, given that almost half of all the Tech companies in the United States have P/S ratios greater than 1.5x and even P/S higher than 6x are not unusual. 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 Xerox Holdings

How Has Xerox Holdings Performed Recently?

Xerox Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still 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 Xerox Holdings.

How Is Xerox Holdings' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.3%. This means it has also seen a slide in revenue over the longer-term as revenue is down 9.8% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 2.3% as estimated by the four analysts watching the company. Meanwhile, the broader industry is forecast to expand by 7.8%, which paints a poor picture.

In light of this, it's understandable that Xerox Holdings' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Xerox Holdings' P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Xerox Holdings' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Xerox Holdings' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Before you take the next step, you should know about the 3 warning signs for Xerox Holdings (2 are a bit unpleasant!) that we have uncovered.

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