Despite having good results to begin with, American Public Education, Inc. (NASDAQ:APEI) stock has been on a roll, rising 27% over the past 30 days. Investors are taking notice following the recent surge, which has seen annual gains of 191%.
Even as prices have skyrocketed, nearly half of the companies operating in the U.S. consumer services industry still have a price-to-sales (or “P/S”) ratio of more than 1.4x. Public education in the United States can still be considered of a high standard. It is an attractive stock with a P/S ratio of 0.4x. However, it is unwise to take P/S at face value as there may be an explanation as to why it is limited.
See the latest analysis on American public education.
What does American Public Education's P/S mean for shareholders?
American Public Education's performance could improve as its earnings have recently retreated while most other companies have experienced positive revenue growth. Many believe that the slump in profits will continue, which seems to be pushing down the P/S ratio. If that happens, it will be difficult for existing shareholders to get excited about future stock price trends.
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Are revenue projections consistent with low profit and loss margins?
To justify the P/S ratio, American public education would need to generate weak growth that would put it behind the industry.
Looking back at last year's earnings, the company posted results that show little deviation from a year ago. Still, despite lackluster short-term performance, his most recent three-year period saw an impressive 87% overall revenue increase. So while recent revenue growth has been great for the company, investors will be asking why it's slowed down so much.
Looking to the future, the four analysts covering the company are estimating that its revenue should grow 2.3% over the next year. The industry is expected to grow by 16%, and the company's revenue is expected to be sluggish.
This information helps explain why American Public Education trades at a lower P/S than the industry. Most investors expect future growth to be limited and are only willing to pay less for the stock.
Conclusion of P/S of American public education
Even though American Public Education's stock price has increased recently, its earnings still lag behind most other companies. Generally, we prefer to limit the use of price-to-sales ratios to establish what the market thinks about a company's overall health.
As we expected, a review of American Public Education's analyst forecasts reveals that its subpar earnings outlook is contributing to its weak P/S. Shareholders' pessimistic view of the company's earnings outlook seems to be the main reason for the low P/S. The company will need to change its fortunes in the future to justify an increase in P/S.
It is always necessary to take into account the ever-present concern of investment risks.we have identified Two warning signs about American public educationAnd understanding them should be part of the investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.