What You Can Learn From AHT Syngas Technology N.V.'s (FRA:3SQ1) P/S After Its 27% Share Price Crash

Unfortunately for some shareholders, the AHT Syngas Technology N.V. (FRA:3SQ1) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 63% loss during that time.

Even after such a large drop in price, given close to half the companies operating in Germany's Construction industry have price-to-sales ratios (or "P/S") below 0.5x, you may still consider AHT Syngas Technology as a stock to potentially avoid with its 1.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for AHT Syngas Technology

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

Recent times have been quite advantageous for AHT Syngas Technology as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for AHT Syngas Technology, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is AHT Syngas Technology's Revenue Growth Trending?

In order to justify its P/S ratio, AHT Syngas Technology would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 109% last year. 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 6.5% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why AHT Syngas Technology's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Key Takeaway

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. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's no surprise that AHT Syngas Technology can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for AHT Syngas Technology (1 is a bit concerning!) that you need to take into consideration.

If you're unsure about the strength of AHT Syngas Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.