Volatus Aerospace Inc. (CVE:FLT) Shares May Have Slumped 28% But Getting In Cheap Is Still Unlikely

Volatus Aerospace Inc. (CVE:FLT) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Even after such a large drop in price, you could still be forgiven for thinking Volatus Aerospace is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.2x, considering almost half the companies in Canada's Airlines industry have P/S ratios below 0.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for Volatus Aerospace

What Does Volatus Aerospace's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Volatus Aerospace's revenue has gone into reverse gear, which is not great. It might be that many expect the dour 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?

Volatus Aerospace's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered a frustrating 2.3% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 211% 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.

Turning to the outlook, the next three years should generate growth of 37% per year as estimated by the lone analyst watching the company. With the industry predicted to deliver 320% growth each year, the company is positioned for a weaker revenue result.

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 Bottom Line On Volatus Aerospace's P/S

Despite the recent share price weakness, Volatus Aerospace's P/S remains higher than most other companies in the industry. 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. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

It is also worth noting that we have found 2 warning signs for Volatus Aerospace (1 is concerning!) that you need to take into consideration.

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.