Hertz Global Holdings, Inc.'s (NASDAQ:HTZ) 44% Dip In Price Shows Sentiment Is Matching Revenues

To the annoyance of some shareholders, Hertz Global Holdings, Inc. (NASDAQ:HTZ) shares are down a considerable 44% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 83% loss during that time.

After such a large drop in price, Hertz Global Holdings may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Transportation industry in the United States have P/S ratios greater than 1.3x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Hertz Global Holdings

How Has Hertz Global Holdings Performed Recently?

With revenue growth that's superior to most other companies of late, Hertz Global Holdings has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you 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 Hertz Global Holdings.

How Is Hertz Global Holdings' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Hertz Global Holdings' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.4% last year. The latest three year period has also seen an excellent 103% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 3.7% as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 8.6% growth forecast for the broader industry.

With this in consideration, its clear as to why Hertz Global Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The southerly movements of Hertz Global Holdings' shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Hertz Global Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 4 warning signs for Hertz Global Holdings you should be aware of, and 2 of them can't be ignored.

If you're unsure about the strength of Hertz Global Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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