To the annoyance of some shareholders, Applied UV, Inc. (NASDAQ:AUVI) shares are down a considerable 26% in the last month, which continues a horrid run for the company.    For any long-term shareholders, the last month ends a year to forget by locking in a 99% share price decline.  

Since its price has dipped substantially, Applied UV may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Building industry in the United States have P/S ratios greater than 1.5x and even P/S higher than 4x aren't out of the ordinary.   However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.  

NasdaqCM:AUVI Price to Sales Ratio vs Industry April 2nd 2024

How Applied UV Has Been Performing

Applied UV certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace.   One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future.  If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.    

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Applied UV's earnings, revenue and cash flow.  

Is There Any Revenue Growth Forecasted For Applied UV?  

The only time you'd be truly comfortable seeing a P/S as low as Applied UV's is when the company's growth is on track to lag the industry.  

Taking a look back first, we see that the company grew revenue by an impressive 99% last year.    The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance.  Therefore, it's fair to say the revenue growth recently has been superb for the company.  

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 6.9% shows it's noticeably more attractive.

With this in mind, we find it intriguing that Applied UV's P/S isn't as high compared to that of its industry peers.  Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.  

The Bottom Line On Applied UV's P/S

Applied UV's recently weak share price has pulled its P/S back below other Building companies.      We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Applied UV revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations.  When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio.  It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.    

Plus, you should also learn about these   4 warning signs we've spotted with Applied UV.

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.