Investors Give Fluence Corporation Limited (ASX:FLC) Shares A 30% Hiding

Unfortunately for some shareholders, the Fluence Corporation Limited (ASX:FLC) share price has dived 30% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 73% share price decline.

After such a large drop in price, it would be understandable if you think Fluence is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.5x, considering almost half the companies in Australia's Water Utilities industry have P/S ratios above 2.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Fluence

What Does Fluence's Recent Performance Look Like?

Fluence 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. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Fluence's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Fluence's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 26%. This means it has also seen a slide in revenue over the longer-term as revenue is down 54% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 23% per year over the next three years. With the industry only predicted to deliver 5.8% per annum, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Fluence's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Fluence's P/S Mean For Investors?

Fluence's recently weak share price has pulled its P/S back below other Water Utilities companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at Fluence's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You need to take note of risks, for example - Fluence has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

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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.