AHT Syngas Technology N.V.'s (FRA:3SQ1) 31% Cheaper Price Remains In Tune With Revenues

The AHT Syngas Technology N.V. (FRA:3SQ1) share price has fared very poorly over the last month, falling by a substantial 31%. For any long-term shareholders, the last month ends a year to forget by locking in a 62% share price decline.

Even after such a large drop in price, you could still be forgiven for thinking AHT Syngas Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.5x, considering almost half the companies in Germany's Construction industry have P/S ratios below 0.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for AHT Syngas Technology

What Does AHT Syngas Technology's P/S Mean For Shareholders?

Recent times have been advantageous for AHT Syngas Technology as its revenues have been rising faster 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.

Keen to find out how analysts think AHT Syngas Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For AHT Syngas Technology?

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

Retrospectively, the last year delivered an exceptional 109% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 38% each year during the coming three years according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.8% 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. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From AHT Syngas Technology's P/S?

There's still some elevation in AHT Syngas Technology's P/S, even if the same can't be said for its share price recently. 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.

As we suspected, our examination of AHT Syngas Technology's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You need to take note of risks, for example - AHT Syngas Technology has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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

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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.