Stock Analysis

A Piece Of The Puzzle Missing From Steer Technologies Inc.'s (CVE:STER) 62% Share Price Climb

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TSXV:STER
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Despite an already strong run, Steer Technologies Inc. (CVE:STER) shares have been powering on, with a gain of 62% in the last thirty days. But the last month did very little to improve the 80% share price decline over the last year.

Even after such a large jump in price, Steer Technologies may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Transportation industry in Canada have P/S ratios greater than 1.5x and even P/S higher than 7x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Steer Technologies

ps-multiple-vs-industry
TSXV:STER Price to Sales Ratio vs Industry January 15th 2024

How Steer Technologies Has Been Performing

Steer Technologies has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Steer Technologies' earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Steer Technologies?

The only time you'd be truly comfortable seeing a P/S as low as Steer Technologies' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 8.9%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that Steer Technologies' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

Despite Steer Technologies' share price climbing recently, its P/S still lags most other companies. 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.

We're very surprised to see Steer Technologies currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

You should always think about risks. Case in point, we've spotted 3 warning signs for Steer Technologies you should be aware of, and 2 of them make us uncomfortable.

If these risks are making you reconsider your opinion on Steer Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

Valuation is complex, but we're helping make it simple.

Find out whether Steer Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.