The Sphere 3D Corp. (NASDAQ:ANY) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. For any long-term shareholders, the last month ends a year to forget by locking in a 66% share price decline.

Since its price has dipped substantially, Sphere 3D may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.5x and even P/S higher than 13x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

What Does Sphere 3D's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Sphere 3D has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Sphere 3D?

The only time you'd be truly comfortable seeing a P/S as depressed as Sphere 3D's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 38% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 7.1% as estimated by the only analyst watching the company. With the industry predicted to deliver 26% growth, that's a disappointing outcome.

With this in consideration, we find it intriguing that Sphere 3D's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Sphere 3D's P/S

Sphere 3D's P/S looks about as weak as its stock price lately. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Sphere 3D's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Sphere 3D's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Sphere 3D (of which 1 is concerning!) you should know about.

If you're unsure about the strength of Sphere 3D's 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.