Oxford Industries, Inc.'s (NYSE:OXM) Business Is Yet to Catch Up With Its Share Price

Simply Wall St · 10/17 15:45

There wouldn't be many who think Oxford Industries, Inc.'s (NYSE:OXM) price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S for the Luxury industry in the United States is very similar. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Oxford Industries

ps-multiple-vs-industry
NYSE:OXM Price to Sales Ratio vs Industry October 17th 2024

What Does Oxford Industries' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Oxford Industries has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. 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 Oxford Industries will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Oxford Industries' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Although pleasingly revenue has lifted 56% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 0.1% over the next year. With the industry predicted to deliver 3.6% growth, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Oxford Industries' P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Oxford Industries' P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Given that Oxford Industries' revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Oxford Industries you should know about.

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).