Gilat Satellite Networks Ltd.'s (NASDAQ:GILT) Subdued P/S Might Signal An Opportunity

With a median price-to-sales (or "P/S") ratio of close to 1.2x in the Communications industry in the United States, you could be forgiven for feeling indifferent about Gilat Satellite Networks Ltd.'s (NASDAQ:GILT) P/S ratio of 1.3x. 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 Gilat Satellite Networks

How Gilat Satellite Networks Has Been Performing

Recent times haven't been great for Gilat Satellite Networks as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Gilat Satellite Networks' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 11%. The latest three year period has also seen an excellent 60% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 18% as estimated by the sole analyst watching the company. That's shaping up to be materially higher than the 2.1% growth forecast for the broader industry.

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

What Does Gilat Satellite Networks' P/S Mean For Investors?

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.

Despite enticing revenue growth figures that outpace the industry, Gilat Satellite Networks' P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Gilat Satellite Networks that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.