Altice USA, Inc.'s (NYSE:ATUS) Revenues Are Not Doing Enough For Some Investors

With a price-to-sales (or "P/S") ratio of 0.1x Altice USA, Inc. (NYSE:ATUS) may be sending bullish signals at the moment, given that almost half of all the Media companies in the United States have P/S ratios greater than 0.8x and even P/S higher than 3x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Altice USA

What Does Altice USA's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Altice USA's 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 you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is Altice USA's Revenue Growth Trending?

Altice USA'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 3.1% decrease to the company's top line. As a result, revenue from three years ago have also fallen 11% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue growth is heading into negative territory, declining 3.1% each year over the next three years. That's not great when the rest of the industry is expected to grow by 2.4% per annum.

With this in consideration, we find it intriguing that Altice USA's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Altice USA's P/S Mean For Investors?

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.

As we suspected, our examination of Altice USA's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Altice USA you should know about.

If these risks are making you reconsider your opinion on Altice USA, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.