Those holding Skillsoft Corp. (NYSE:SKIL) shares would be relieved that the share price has rebounded 38% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 69% share price drop in the last twelve months.

In spite of the firm bounce in price, Skillsoft may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Professional Services industry in the United States have P/S ratios greater than 1.3x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

How Has Skillsoft Performed Recently?

Skillsoft could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Skillsoft will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Skillsoft?

Skillsoft'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 3.6% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 29% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the only analyst covering the company suggest revenue growth is heading into negative territory, declining 1.0% over the next year. Meanwhile, the broader industry is forecast to expand by 6.3%, which paints a poor picture.

With this information, we are not surprised that Skillsoft is trading at a P/S lower than the industry. 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.

The Bottom Line On Skillsoft's P/S

Despite Skillsoft's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Skillsoft's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Skillsoft's poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks.

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.

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.