Kyndryl Holdings, Inc. (NYSE:KD) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 62% in the last year.

Even after such a large jump in price, Kyndryl Holdings may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the IT industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Kyndryl Holdings

What Does Kyndryl Holdings' Recent Performance Look Like?

Kyndryl Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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Is There Any Revenue Growth Forecasted For Kyndryl Holdings?

In order to justify its P/S ratio, Kyndryl Holdings 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 3.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 13% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 7.6% during the coming year according to the four analysts following the company. Meanwhile, the broader industry is forecast to expand by 9.6%, which paints a poor picture.

With this in consideration, we find it intriguing that Kyndryl Holdings' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

Kyndryl Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

It's clear to see that Kyndryl Holdings maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Kyndryl Holdings with six simple checks on some of these key factors.

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

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.