Little Excitement Around Ballard Power Systems Inc.'s (TSE:BLDP) Revenues As Shares Take 25% Pounding

The Ballard Power Systems Inc. (TSE:BLDP) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 83%, which is great even in a bull market.

Since its price has dipped substantially, considering about half the companies operating in Canada's Electrical industry have price-to-sales ratios (or "P/S") above 32x, you may consider Ballard Power Systems as an great investment opportunity with its 8.9x P/S ratio. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Ballard Power Systems

How Ballard Power Systems Has Been Performing

Ballard Power Systems 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.

Keen to find out how analysts think Ballard Power Systems' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Ballard Power Systems' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.9%. The last three years don't look nice either as the company has shrunk revenue by 9.8% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 21% per year during the coming three years according to the analysts following the company. With the industry predicted to deliver 161% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Ballard Power Systems' 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

Ballard Power Systems' P/S looks about as weak as its stock price lately. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Ballard Power Systems' analyst forecasts revealed that its inferior revenue outlook is contributing 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Ballard Power Systems is showing 1 warning sign in our investment analysis, you should know about.

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.