Investors Still Aren't Entirely Convinced By LION E-Mobility AG's (ETR:LMIA) Revenues Despite 30% Price Jump

LION E-Mobility AG (ETR:LMIA) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 65% share price drop in the last twelve months.

Although its price has surged higher, given about half the companies operating in Germany's Electrical industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider LION E-Mobility as an attractive investment with its 0.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for LION E-Mobility

What Does LION E-Mobility's P/S Mean For Shareholders?

LION E-Mobility could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on LION E-Mobility will help you uncover what's on the horizon.

How Is LION E-Mobility's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like LION E-Mobility's to be considered reasonable.

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 29%. Still, the latest three year period has seen an excellent 39% 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.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 12% over the next year. Meanwhile, the rest of the industry is forecast to expand by 10%, which is not materially different.

In light of this, it's peculiar that LION E-Mobility's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

LION E-Mobility's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It looks to us like the P/S figures for LION E-Mobility remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 4 warning signs for LION E-Mobility (2 are potentially serious!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.