Some PAR Technology Corporation (NYSE:PAR) Shareholders Look For Exit As Shares Take 26% Pounding

Unfortunately for some shareholders, the PAR Technology Corporation (NYSE:PAR) share price has dived 26% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 24% share price drop.

Although its price has dipped substantially, you could still be forgiven for thinking PAR Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.7x, considering almost half the companies in the United States' Electronic industry have P/S ratios below 2.7x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for PAR Technology

How Has PAR Technology Performed Recently?

With revenue growth that's superior to most other companies of late, PAR Technology has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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Do Revenue Forecasts Match The High P/S Ratio?

PAR Technology's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 46%. The latest three year period has also seen a 29% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 14% as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 13%, which is not materially different.

With this information, we find it interesting that PAR Technology is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

What Does PAR Technology's P/S Mean For Investors?

PAR Technology's P/S remain high even after its stock plunged. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Analysts are forecasting PAR Technology's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. When we see revenue growth that just matches the industry, we don't expect elevates P/S figures to remain inflated for the long-term. A positive change is needed in order to justify the current price-to-sales ratio.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for PAR Technology that you should be aware of.

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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.