Lacklustre Performance Is Driving Exro Technologies Inc.'s (TSE:EXRO) 28% Price Drop

To the annoyance of some shareholders, Exro Technologies Inc. (TSE:EXRO) shares are down a considerable 28% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 90% loss during that time.

After such a large drop in price, Exro Technologies' price-to-sales (or "P/S") ratio of 2.2x might make it look like a strong buy right now compared to the wider Electrical industry in Canada, where around half of the companies have P/S ratios above 4.8x and even P/S above 243x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Exro Technologies

How Has Exro Technologies Performed Recently?

Recent times have been advantageous for Exro Technologies as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Exro Technologies' 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?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 261% as estimated by the four analysts watching the company. With the industry predicted to deliver 979% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Exro Technologies' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Exro Technologies' P/S Mean For Investors?

Shares in Exro Technologies have plummeted and its P/S has followed suit. 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 Exro Technologies' 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 Exro Technologies is showing 4 warning signs in our investment analysis, and 2 of those are concerning.

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

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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.