AHT Syngas Technology N.V. (FRA:3SQ1) Stocks Pounded By 33% But Not Lagging Industry On Growth Or Pricing

The AHT Syngas Technology N.V. (FRA:3SQ1) share price has fared very poorly over the last month, falling by a substantial 33%. For any long-term shareholders, the last month ends a year to forget by locking in a 55% share price decline.

In spite of the heavy fall in price, given around half the companies in Germany's Construction industry have price-to-sales ratios (or "P/S") below 0.1x, you may still consider AHT Syngas Technology as a stock to avoid entirely with its 2.5x 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 so lofty.

Check out our latest analysis for AHT Syngas Technology

What Does AHT Syngas Technology's Recent Performance Look Like?

AHT Syngas Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on AHT Syngas Technology will help you uncover what's on the horizon.

How Is AHT Syngas Technology's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like AHT Syngas Technology's to be considered reasonable.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 44% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 8.0% per year, which is noticeably less attractive.

With this information, we can see why AHT Syngas Technology is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Even after such a strong price drop, AHT Syngas Technology's P/S still exceeds the industry median significantly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that AHT Syngas Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Construction industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for AHT Syngas Technology (1 is a bit concerning!) that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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