Not Many Are Piling Into Forward Air Corporation (NASDAQ:FWRD) Just Yet

There wouldn't be many who think Forward Air Corporation's (NASDAQ:FWRD) price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S for the Logistics industry in the United States is similar at about 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Forward Air

What Does Forward Air's P/S Mean For Shareholders?

Forward Air certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Forward Air will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Forward Air would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 79%. The strong recent performance means it was also able to grow revenue by 40% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 23% during the coming year according to the five analysts following the company. With the industry only predicted to deliver 4.2%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Forward Air's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

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.

We've established that Forward Air currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Forward Air you should be aware of, and 1 of them is a bit concerning.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.