Not Many Are Piling Into GreenPower Motor Company Inc. (CVE:GPV) Stock Yet As It Plummets 26%

To the annoyance of some shareholders, GreenPower Motor Company Inc. (CVE:GPV) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 54% share price decline.

Even after such a large drop in price, there still wouldn't be many who think GreenPower Motor's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in Canada's Machinery industry is similar at about 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for GreenPower Motor

How GreenPower Motor Has Been Performing

Recent times have been advantageous for GreenPower Motor as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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 72% 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. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 9.5% growth forecast for the broader industry.

In light of this, it's curious that GreenPower Motor's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

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

Following GreenPower Motor's share price tumble, its P/S is just clinging on to the industry median P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, GreenPower Motor's P/S isn't quite what we'd expect. 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 3 warning signs for GreenPower Motor that you need to be mindful of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.