With an average price-to-sales ratio (or “P/S”) of nearly 2.4x in the U.S. electricity sector, you could be forgiven for feeling indifferent about Eversource Energy (NYSE:ES) P/S ratio of 2x. However, investors may overlook a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Eversource Energy

How has Eversource Energy performed recently?

Eversource Energy has struggled lately as revenue has fallen faster than most other companies. Perhaps the market expects future revenue performance to match that of the rest of the sector, which is why the price/earnings ratio has not fallen. If you still like the company, you’ll want the revenue trajectory to turn around before you make any decisions. If not, existing shareholders may be somewhat nervous about the viability of the share price.

Want to know how analysts think Eversource Energy’s future compares to the industry? In that case our free report is a good starting point.

Is there any revenue growth expected for Eversource Energy?

Eversource Energy’s P/S ratio would be typical of a company expected to deliver only moderate growth and, more importantly, perform in line with the industry.

Looking back first, the company’s revenue growth last year wasn’t something to be excited about, as it posted a disappointing 5.1% decline. In any case, thanks to the previous growth period, sales have managed to increase by a handy 21% in total compared to three years ago. Accordingly, while shareholders would have preferred to keep the trend going, they would be broadly satisfied with revenue growth over the medium term.

In terms of prospects, the next three years should generate growth of 7.3% per year, as estimated by the twelve analysts covering the company. Meanwhile, the rest of the sector is expected to grow at just 5.0% annually, which is noticeably less attractive.

With this in mind, we find it intriguing that Eversource Energy’s P/S is closely aligned with its peers. Apparently some shareholders are skeptical of the predictions and have accepted lower sales prices.

The final result of Eversource Energy’s P/S

In general, we prefer to limit the use of the price-to-sales ratio to determining what the market thinks about the overall health of a company.

Looking at Eversource Energy’s analyst forecasts showed that its superior revenue prospects are not providing the boost to the price-to-earnings ratio we expected. There may be some risks that the market is taking into account, which means that the price-earnings ratio is not in line with the positive outlook. However, if you agree with the analysts’ predictions, you may be able to buy the stock at an attractive price.

There are also other vital risk factors to consider, and we discovered that 3 warning signs for Eversource Energy (2 are a bit off-putting!) Things to consider before investing here.

It’s important to make sure you look for a great company, not just the first idea you come across. So if growing profitability fits your idea of ​​a great business, check this out free list of interesting companies with strong recent earnings growth (and a low price-to-earnings ratio).

Do you have feedback on this article? Worried about the content? Please contact us directly from us. You can also email the editorial 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 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 you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.