GreenPower Motor Company Inc. (CVE:GPV) Might Not Be As Mispriced As It Looks After Plunging 26%

GreenPower Motor Company Inc. (CVE:GPV) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 64% share price decline.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about GreenPower Motor's P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Canada is also close to 1.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for GreenPower Motor

What Does GreenPower Motor's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, GreenPower Motor's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For GreenPower Motor?

GreenPower Motor's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 54%. Still, the latest three year period has seen an excellent 76% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 40% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 5.8% growth forecast for the broader industry.

With this in consideration, we find it intriguing that GreenPower Motor's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On GreenPower Motor's P/S

With its share price dropping off a cliff, the P/S for GreenPower Motor looks to be in line with the rest of the Machinery industry. 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.

We've established that GreenPower Motor currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware GreenPower Motor is showing 4 warning signs in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.