Investors Aren't Entirely Convinced By GreenPower Motor Company Inc.'s (CVE:GPV) Revenues

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Machinery industry in Canada, you could be forgiven for feeling indifferent about GreenPower Motor Company Inc.'s (CVE:GPV) P/S ratio of 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for GreenPower Motor

How GreenPower Motor Has Been Performing

With revenue growth that's superior to most other companies of late, GreenPower Motor has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on GreenPower Motor will help you uncover what's on the horizon.

How Is GreenPower Motor's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 195% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 65% over the next year. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

In light of this, it's curious that GreenPower Motor's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

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. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for GreenPower Motor you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.