Revenues Tell The Story For Forward Air Corporation (NASDAQ:FWRD) As Its Stock Soars 29%
Those holding Forward Air Corporation (NASDAQ:FWRD) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.
Although its price has surged higher, you could still be forgiven for feeling indifferent about Forward Air's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Logistics industry in the United States is also close to 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Forward Air
What Does Forward Air's P/S Mean For Shareholders?
Forward Air certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
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.What Are Revenue Growth Metrics Telling Us About The P/S?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Forward Air's to be considered reasonable.
Retrospectively, the last year delivered a decent 15% gain to the company's revenues. The latest three year period has also seen a 28% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 3.5% over the next year. With the industry predicted to deliver 2.1% growth , the company is positioned for a comparable revenue result.
With this information, we can see why Forward Air is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.
What Does Forward Air's P/S Mean For Investors?
Forward Air's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
We've seen that Forward Air 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.
Having said that, be aware Forward Air is showing 1 warning sign in our investment analysis, 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.
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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.