The Market Doesn't Like What It Sees From Vulcan Energy Resources Limited's (ASX:VUL) Revenues Yet As Shares Tumble 26%

Vulcan Energy Resources Limited (ASX:VUL) shares have had a horrible month, losing 26% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 96%, which is great even in a bull market.

Since its price has dipped substantially, Vulcan Energy Resources may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 19.5x, since almost half of all companies in the Metals and Mining industry in Australia have P/S ratios greater than 61.2x and even P/S higher than 295x 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.

See our latest analysis for Vulcan Energy Resources

What Does Vulcan Energy Resources' Recent Performance Look Like?

Recent times haven't been great for Vulcan Energy Resources as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Vulcan Energy Resources.

How Is Vulcan Energy Resources' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 59% last year. The latest three year period has also seen an excellent 276% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 45% per annum as estimated by the two analysts watching the company. That's shaping up to be materially lower than the 573% each year growth forecast for the broader industry.

With this in consideration, its clear as to why Vulcan Energy Resources' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Vulcan Energy Resources' P/S looks about as weak as its stock price lately. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of Vulcan Energy Resources' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Vulcan Energy Resources that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.