PS International Group Ltd.'s (NASDAQ:PSIG) Shares May Have Run Too Fast Too Soon

With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Logistics industry in the United States, you could be forgiven for feeling indifferent about PS International Group Ltd.'s (NASDAQ:PSIG) P/S ratio of 0.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for PS International Group

How Has PS International Group Performed Recently?

As an illustration, revenue has deteriorated at PS International Group over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for PS International Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

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

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 38%. This means it has also seen a slide in revenue over the longer-term as revenue is down 33% 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.

Comparing that to the industry, which is predicted to shrink 0.01% in the next 12 months, the company's downward momentum is still inferior based on recent medium-term annualised revenue results.

With this information, it's perhaps strange that PS International Group is trading at a fairly similar P/S in comparison. With revenue going quickly in reverse, it's not guaranteed that the P/S has found a floor yet. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Final Word

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.

We've established that PS International Group currently trades on a higher than expected P/S since its recent three-year revenues are even worse than the forecasts for a struggling industry. When we see below average revenue, we suspect the share price is at risk of declining, sending the moderate P/S lower. In addition, we would be concerned whether the company can even maintain its medium-term level of performance under these tough industry conditions. This would place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 4 warning signs for PS International Group (of which 2 are potentially serious!) you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.