Custom Truck One Source, Inc. (NYSE:CTOS) looks right on target with a 30% price jump

Custom Truck One Source, Inc. (NYSE:CTOS) shares had a truly impressive month, gaining 30% after a shaky period earlier. Unfortunately, last month's gains have done little to offset last year's losses, with the stock still down 29% in that period.

Even after such a big jump in price, there still aren't many who think Custom Truck One Source's price-to-sales ratio (or “P/S”) of 0.6 is worth mentioning given the median P /S considers The trade distributor industry in the United States is similar at about 1x. However, investors may miss a clear opportunity or potential setback if there is no rational basis for the P/E ratio.

Check out our latest analysis for Custom Truck One Source

What does Custom Truck One Source's P/S mean for shareholders?

Custom Truck One Source could do better as its sales have been declining recently while most other companies have seen positive sales growth. One possibility is that the price-to-sales ratio is moderate because investors expect this poor earnings performance to reverse. However, if this isn't the case, investors could get caught paying too much for the stock.

If you want to see what analysts are predicting for the future, you should check out our free Custom Truck One Source Report.

Is Custom Truck One Source projected to see some revenue growth?

Custom Truck One Source's P/E ratio would be typical of a company that is expected to experience only moderate growth and, more importantly, perform in line with the industry.

Looking back, last year resulted in a frustrating 1.5% decline in the company's revenue. However, some very strong previous years meant that overall sales increased by an impressive 102% over the last three years. Accordingly, although shareholders would have preferred to continue, they would definitely welcome the medium-term sales growth rates.

As for the outlook, next year is expected to generate growth of 3.3%, according to estimates from the six analysts covering the company. This is likely to be similar to the 4.8% growth forecast for the entire industry.

With this information, we can see why Custom Truck One Source trades at a fairly similar P/E to the industry. Apparently shareholders prefer to just stay put while the company keeps a low profile.

The last word

Its shares have risen significantly and now Custom Truck One Source's P/E ratio is back in line with the industry average. We would say that the price-to-sales ratio is not primarily a valuation tool, but rather is used to measure current investor sentiment and future expectations.

We've seen that Custom Truck One Source has a reasonable P/E ratio as its revenue growth numbers are in line with the rest of the industry. At this point, investors feel that the potential for improvement or deterioration in sales is not great enough to drive the P/E ratio in a higher or lower direction. If everything remains constant, the possibility of a drastic share price move remains fairly low.

Many other important risk factors can be found on the company's balance sheet. You can assess many of the main risks through us free Custom Truck One Source Balance Sheet Analysis with Six Simple Checks.

If yes uncertain about the strength of Custom Truck One Source's businessExplore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Do you have feedback on this article? Worried about the content? Get in touch directly with us. Alternatively, you can also send an email to editor-team (at) simplywallst.com.

This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.