BrightView Holdings, Inc.'s (NYSE:BV) price-to-sales (or "P/S") ratio of 0.5x might make it look like a buy right now compared to the Commercial Services industry in the United States, where around half of the companies have P/S ratios above 1.3x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for BrightView Holdings

How Has BrightView Holdings Performed Recently?

While the industry has experienced revenue growth lately, BrightView Holdings' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on BrightView Holdings.

How Is BrightView Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BrightView Holdings' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 1.7% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 8.4% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 2.8% per year over the next three years. With the industry predicted to deliver 8.3% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why BrightView Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that BrightView Holdings 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for BrightView Holdings that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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