Invesco Ltd. (NYSE:IVZ) shares have continued their recent momentum with a 36% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 22% is also fairly reasonable.

Although its price has surged higher, Invesco may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.5x, since almost half of all companies in the Capital Markets industry in the United States have P/S ratios greater than 4x and even P/S higher than 11x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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What Does Invesco's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Invesco has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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How Is Invesco's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Invesco's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 6.0%. Still, lamentably revenue has fallen 11% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 24% over the next year. With the industry predicted to deliver 3.1% growth, that's a disappointing outcome.

In light of this, it's understandable that Invesco's P/S would sit below the majority of other companies. 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 Invesco's P/S

Invesco's recent share price jump still sees fails to bring its P/S alongside the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It's clear to see that Invesco maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.