Yahoo Finance Nutanix, Inc.'s (NASDAQ:NTNX) P/S Still Appears To Be Reasonable
There wouldn't be many who think Nutanix, Inc.'s (NASDAQ:NTNX) price-to-sales (or "P/S") ratio of 3.6x is worth a mention when the median P/S for the Software industry in the United States is similar at about 4.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for Nutanix
What Does Nutanix's Recent Performance Look Like?
Nutanix could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Nutanix will help you uncover what's on the horizon.
Is There Some Revenue Growth Forecasted For Nutanix?
The only time you'd be comfortable seeing a P/S like Nutanix's is when the company's growth is tracking the industry closely.
If we review the last year of revenue growth, the company posted a worthy increase of 12%. Pleasingly, revenue has also lifted 32% 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 superb for the company.
Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the analysts following the company. That's shaping up to be similar to the 12% growth forecast for the broader industry.
With this information, we can see why Nutanix is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.
The Final Word
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
We've seen that Nutanix 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. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.
Before you take the next step, you should know about the 3 warning signs for Nutanix (1 can't be ignored!) that we have uncovered.
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.
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