With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Logistics industry in the United States, you could be forgiven for feeling indifferent about Forward Air Corporation's (NASDAQ:FWRD) P/S ratio of 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Forward Air Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Forward Air has been doing quite well of late. One possibility is that the P/S ratio is moderate because investors think the company's revenue will be less resilient moving forward. 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 not quite in favour.

Keen to find out how analysts think Forward Air's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Forward Air's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Forward Air's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 79% gain to the company's top line. The latest three year period has also seen an excellent 40% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 23% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 4.4% growth forecast for the broader industry.

With this information, we find it interesting that Forward Air is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

Despite enticing revenue growth figures that outpace the industry, Forward Air's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Forward Air is showing 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.