Despite an already strong run, Comtech Telecommunications Corp. (NASDAQ:CMTL) shares have been powering on, with a gain of 35% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 47% over that time.

In spite of the firm bounce in price, when close to half the companies operating in the United States' Communications industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Comtech Telecommunications as an enticing stock to check out with its 0.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Comtech Telecommunications' P/S Mean For Shareholders?

Comtech Telecommunications certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Comtech Telecommunications would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 6.6% gain to the company's revenues. Still, lamentably revenue has fallen 3.8% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 4.2% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 8.1% growth forecast for the broader industry.

With this information, we can see why Comtech Telecommunications is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Comtech Telecommunications' P/S Mean For Investors?

The latest share price surge wasn't enough to lift Comtech Telecommunications' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Comtech Telecommunications maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Comtech Telecommunications that you should be aware of.

If these risks are making you reconsider your opinion on Comtech Telecommunications, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.