To the annoyance of some shareholders, HUB Cyber Security Ltd. (NASDAQ:HUBC) shares are down a considerable 44% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 98% loss during that time.
Following the heavy fall in price, HUB Cyber Security may be sending buy signals at present with its price-to-sales (or “P/S”) ratio of 0.2x, considering almost half of all companies in the IT industry in the United States have P/S ratios greater than 2.2x 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 limited.
Check out our latest analysis for HUB Cyber Security
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What Does HUB Cyber Security’s P/S Mean For Shareholders?
For instance, HUB Cyber Security’s receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn’t good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on HUB Cyber Security will be hoping that this isn’t the case so that they can pick up the stock at a lower valuation.
Want the full picture on earnings, revenue and cash flow for the company? Then ourfree report on HUB Cyber Security will help you shine a light on its historical performance.
Is There Any Revenue Growth Forecasted For HUB Cyber Security?
HUB Cyber Security’s P/S ratio would be typical for a company that’s only expected to deliver limited growth, and importantly, perform worse than the industry.
Retrospectively, the last year delivered a frustrating 13% decrease to the company’s top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 59% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 21% over the next year, which really puts the company’s recent medium-term revenue decline into perspective.
With this information, we are not surprised that HUB Cyber Security is trading at a P/S lower than the industry. Nonetheless, there’s no guarantee the P/S has reached a floor yet with revenue going in reverse. There’s potential for the P/S to fall to even lower levels if the company doesn’t improve its top-line growth.
The Final Word
HUB Cyber Security’s P/S has taken a dip along with its share price. 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.
Our examination of HUB Cyber Security confirms that the company’s shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won’t provide any pleasant surprises either. If recent medium-term revenue trends continue, it’s hard to see the share price moving strongly in either direction in the near future under these circumstances.
You always need to take note of risks, for example – HUB Cyber Security has 5 warning signs we think you should be aware 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).
Valuation is complex, but we’re here to simplify it.
Discover if HUB Cyber Security might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
