Some Shareholders Feeling Restless Over Volatus Aerospace Inc.'s (CVE:FLT) P/S Ratio

When close to half the companies in the Airlines industry in Canada have price-to-sales ratios (or "P/S") below 0.6x, you may consider Volatus Aerospace Inc. (CVE:FLT) as a stock to potentially avoid with its 2.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Volatus Aerospace

How Volatus Aerospace Has Been Performing

Volatus Aerospace could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Volatus Aerospace would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a frustrating 2.3% decrease to the company's top line. Still, the latest three year period has seen an excellent 211% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 44% per year during the coming three years according to the one analyst following the company. That's shaping up to be materially lower than the 122% each year growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Volatus Aerospace's P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Volatus Aerospace's P/S?

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 concluded that Volatus Aerospace currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Volatus Aerospace (1 is potentially serious!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Volatus Aerospace, 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.