Subdued Growth No Barrier To Volatus Aerospace Inc. (CVE:FLT) With Shares Advancing 30%

Despite an already strong run, Volatus Aerospace Inc. (CVE:FLT) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 177% in the last year.

Following the firm bounce in price, you could be forgiven for thinking Volatus Aerospace is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 12.1x, considering almost half the companies in Canada's Airlines industry have P/S ratios below 0.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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View our latest analysis for Volatus Aerospace

How Volatus Aerospace Has Been Performing

Volatus Aerospace has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Volatus Aerospace's Revenue Growth Trending?

In order to justify its P/S ratio, Volatus Aerospace would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.7%. Still, the latest three year period has seen an excellent 68% 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 three years should generate growth of 48% each year as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 645% per annum, which is noticeably more attractive.

With this information, we find it concerning that Volatus Aerospace is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

Shares in Volatus Aerospace have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

It comes as a surprise to see Volatus Aerospace trade at such a high P/S given the revenue forecasts look less than stellar. 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. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 3 warning signs for Volatus Aerospace that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.