Kraken Robotics Inc. (CVE:PNG) Stocks Pounded By 25% But Not Lagging Industry On Growth Or Pricing

The Kraken Robotics Inc. (CVE:PNG) share price has softened a substantial 25% over the previous 30 days, handing back much of the gains the stock has made lately. The good news is that in the last year, the stock has shone bright like a diamond, gaining 143%.

In spite of the heavy fall in price, Kraken Robotics may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 17.7x, since almost half of all companies in the Electronic industry in Canada have P/S ratios under 4.1x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for Kraken Robotics

What Does Kraken Robotics' Recent Performance Look Like?

Kraken Robotics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Kraken Robotics would need to produce outstanding growth that's well in excess of 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 2.0%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 126% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 44% per year during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 16% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Kraken Robotics' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Kraken Robotics' P/S Mean For Investors?

Even after such a strong price drop, Kraken Robotics' P/S still exceeds the industry median significantly. 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 Kraken Robotics' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Kraken Robotics (1 is potentially serious!) that you need to take into consideration.

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.