The Natural Alternatives International, Inc. (NASDAQ:NAII) share price has fared very poorly over the last month, falling by a substantial 29%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.
Following the heavy fall in price, it would be understandable if you think Natural Alternatives International is a stock with good investment prospects with a price-to-sales ratios (or “P/S”) of 0.1x, considering almost half the companies in the United States’ Personal Products industry have P/S ratios above 1.1x. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
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NasdaqGM:NAII Price to Sales Ratio vs Industry April 20th 2025 How Has Natural Alternatives International Performed Recently?
For example, consider that Natural Alternatives International’s financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. If you 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.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Natural Alternatives International will help you shine a light on its historical performance. Is There Any Revenue Growth Forecasted For Natural Alternatives International?
In order to justify its P/S ratio, Natural Alternatives International would need to produce sluggish growth that’s trailing the industry.
Taking a look back first, the company’s revenue growth last year wasn’t something to get excited about as it posted a disappointing decline of 4.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 27% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
In contrast to the company, the rest of the industry is expected to grow by 0.5% over the next year, which really puts the company’s recent medium-term revenue decline into perspective.
With this information, we are not surprised that Natural Alternatives International is trading at a P/S lower than the industry. Nonetheless, there’s no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.
The Final Word
Natural Alternatives International’s recently weak share price has pulled its P/S back below other Personal Products companies. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Our examination of Natural Alternatives International confirms that the company’s shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn’t great enough to justify a higher P/S ratio. Unless the recent medium-term 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 2 warning signs for Natural Alternatives International (1 doesn’t sit too well with us!) 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.
Discover if Natural Alternatives International might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.