Yahoo Finance Lacklustre Performance Is Driving Ducommun Incorporated's (NYSE:DCO) Low P/S
When you see that almost half of the companies in the Aerospace & Defense industry in the United States have price-to-sales ratios (or "P/S") above 2.1x, Ducommun Incorporated (NYSE:DCO) looks to be giving off some buy signals with its 1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Ducommun
How Has Ducommun Performed Recently?
There hasn't been much to differentiate Ducommun's and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Ducommun will help you uncover what's on the horizon.
How Is Ducommun's Revenue Growth Trending?
In order to justify its P/S ratio, Ducommun would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered a decent 9.3% gain to the company's revenues. Revenue has also lifted 14% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Turning to the outlook, the next year should generate growth of 6.2% as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.
With this information, we can see why Ducommun is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What We Can Learn From Ducommun's P/S?
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 established that Ducommun maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.
We don't want to rain on the parade too much, but we did also find 4 warning signs for Ducommun that you need to be mindful of.
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).
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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.
