With a median price-to-sales (or "P/S") ratio of close to 1.4x in the Commercial Services industry in the United States, you could be forgiven for feeling indifferent about OPENLANE, Inc.'s (NYSE:KAR) P/S ratio of 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does OPENLANE's Recent Performance Look Like?

Recent times haven't been great for OPENLANE as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on OPENLANE will help you uncover what's on the horizon.

How Is OPENLANE's Revenue Growth Trending?

OPENLANE's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.3% last year. This was backed up an excellent period prior to see revenue up by 64% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 5.3% over the next year. That's shaping up to be similar to the 7.2% growth forecast for the broader industry.

With this in mind, it makes sense that OPENLANE's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've seen that OPENLANE maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 1 warning sign for OPENLANE you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.