GSE Systems, Inc. (NASDAQ:GVP) Shares Fly 35% But Investors Aren't Buying For Growth
GSE Systems, Inc. (NASDAQ:GVP) Shares Fly 35% But Investors Aren't Buying For Growth
GSE Systems, Inc. (NASDAQ:GVP) shares have had a really impressive month, gaining 35% after a shaky period beforehand. But the last month did very little to improve the 57% share price decline over the last year.
Although its price has surged higher, GSE Systems may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.3x and even P/S higher than 11x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.
What Does GSE Systems' Recent Performance Look Like?
For instance, GSE Systems' receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming 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.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on GSE Systems will help you shine a light on its historical performance.Do Revenue Forecasts Match The Low P/S Ratio?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like GSE Systems' to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 22% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Comparing that to the industry, which is predicted to deliver 15% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.
With this in mind, we understand why GSE Systems' P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. 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 GSE Systems' P/S
GSE Systems' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.
As we suspected, our examination of GSE Systems revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.
You need to take note of risks, for example - GSE Systems has 4 warning signs (and 3 which don't sit too well with us) we think you should know about.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
GSE系統公司(納斯達克股票代碼:GVP)的股價經歷了一個非常令人印象深刻的月份,在經歷了動盪時期之後上漲了35%。但是上個月幾乎沒有改善去年股價下跌57%的局面。
儘管其價格飆升,但GSE Systems目前看來仍是一個強勁的買入機會,其市銷率(或 “市盈率”)爲0.2倍,因爲美國軟件行業幾乎有一半的公司的市銷率大於4.3倍,即使市盈率高於11倍也並非不尋常。但是,僅按面值計算市銷率是不明智的,因爲可以解釋其爲何如此有限。
GSE Systems的近期表現如何?
例如,GSE Systems最近收入的下降值得深思。一種可能性是市銷率很低,因爲投資者認爲公司在不久的將來在避免整個行業表現不佳方面做得還不夠。如果你喜歡這家公司,你希望情況並非如此,這樣你就有可能在它失寵的時候買入一些股票。
想全面了解公司的收益、收入和現金流嗎?然後,我們關於GSE Systems的免費報告將幫助您了解其歷史表現。收入預測與低市銷率相匹配嗎?
人們固有的假設是,如果像GSE Systems這樣的市銷率被認爲是合理的,公司的表現應該遠遠低於該行業。
在回顧去年的財務狀況時,我們沮喪地看到該公司的收入下降至5.6%。這意味着從長遠來看,其收入也出現了下滑,因爲在過去三年中,總收入下降了22%。因此,不幸的是,我們必須承認,在這段時間內,該公司在增加收入方面做得不好。
相比之下,該行業預計將在未來12個月內實現15%的增長,根據最近的中期收入業績,該公司的下行勢頭令人震驚。
考慮到這一點,我們理解了爲何GSE Systems的市銷率低於大部分行業同行。但是,我們認爲,從長遠來看,收入萎縮不太可能導致市銷率穩定,這可能會使股東爲未來的失望做好準備。如果公司不改善營收增長,市銷率有可能降至更低的水平。
GSE Systems 市銷率的底線
GSE Systems最近的股價上漲仍未能使其市銷率與行業中位數並駕齊驅。僅使用市銷率來確定是否應該出售股票是不明智的,但它可以作爲公司未來前景的實用指南。
正如我們所懷疑的那樣,我們對GSE Systems的檢查顯示,鑑於該行業即將增長,其中期收入的萎縮是其低市銷售率的原因。在現階段,投資者認爲,收入改善的可能性不足以證明更高的市銷率是合理的。鑑於目前的情況,如果最近的中期收入趨勢持續下去,股價似乎不太可能在不久的將來雙向出現任何重大波動。
例如,您需要注意風險——GSE Systems有4個警告標誌(其中3個對我們來說不太合適),我們認爲你應該知道。
當然,具有良好收益增長曆史的盈利公司通常是更安全的選擇。因此,您可能希望看到這些免費收集的市盈率合理且收益增長強勁的其他公司。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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