Slammed 28% LION E-Mobility AG (ETR:LMIA) Screens Well Here But There Might Be A Catch

Unfortunately for some shareholders, the LION E-Mobility AG (ETR:LMIA) share price has dived 28% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 67% loss during that time.

Since its price has dipped substantially, given about half the companies operating in Germany's Electrical industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider LION E-Mobility as an attractive investment with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for LION E-Mobility

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

Recent times haven't been great for LION E-Mobility as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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.

Is There Any Revenue Growth Forecasted For LION E-Mobility?

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

If we review the last year of revenue growth, the company posted a worthy increase of 5.9%. Pleasingly, revenue has also lifted 211% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 23% per year as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 9.5% each year growth forecast for the broader industry.

With this information, we find it odd that LION E-Mobility is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On LION E-Mobility's P/S

LION E-Mobility's recently weak share price has pulled its P/S back below other Electrical companies. 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.

To us, it seems LION E-Mobility currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware LION E-Mobility is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com