Diebold Nixdorf, Incorporated (NYSE:DBD) Held Back By Insufficient Growth Even After Shares Climb 36%

Diebold Nixdorf, Incorporated (NYSE:DBD) shareholders would be excited to see that the share price has had a great month, posting a 36% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, Diebold Nixdorf's price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Tech industry in the United States, where around half of the companies have P/S ratios above 1.4x and even P/S above 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Diebold Nixdorf

What Does Diebold Nixdorf's Recent Performance Look Like?

Recent times have been advantageous for Diebold Nixdorf as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Diebold Nixdorf.

Do Revenue Forecasts Match The Low P/S Ratio?

Diebold Nixdorf's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.9% last year. Still, lamentably revenue has fallen 3.5% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 1.3% over the next year. Meanwhile, the rest of the industry is forecast to expand by 6.1%, which is noticeably more attractive.

With this in consideration, its clear as to why Diebold Nixdorf's P/S is falling short industry peers. 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 Diebold Nixdorf's P/S?

Despite Diebold Nixdorf's share price climbing recently, its P/S still lags most other 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 we suspected, our examination of Diebold Nixdorf's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Diebold Nixdorf has 3 warning signs we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.