Market Cool On Aston Martin Lagonda Global Holdings plc's (LON:AML) Revenues Pushing Shares 29% Lower

Aston Martin Lagonda Global Holdings plc (LON:AML) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 51% loss during that time.

In spite of the heavy fall in price, it's still not a stretch to say that Aston Martin Lagonda Global Holdings' price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Auto industry in the United Kingdom, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Aston Martin Lagonda Global Holdings

What Does Aston Martin Lagonda Global Holdings' P/S Mean For Shareholders?

The recently shrinking revenue for Aston Martin Lagonda Global Holdings has been in line with the industry. It seems that few are expecting the company's revenue performance to deviate much from most other companies, which has held the P/S back. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

Keen to find out how analysts think Aston Martin Lagonda Global Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

Aston Martin Lagonda Global Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.0%. Even so, admirably revenue has lifted 45% in aggregate from three years ago, notwithstanding the last 12 months. 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.

Looking ahead now, revenue is anticipated to climb by 11% per annum during the coming three years according to the eight analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 2.9% each year, which is noticeably less attractive.

With this information, we find it interesting that Aston Martin Lagonda Global Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Aston Martin Lagonda Global Holdings' P/S

With its share price dropping off a cliff, the P/S for Aston Martin Lagonda Global Holdings looks to be in line with the rest of the Auto industry. 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.

Looking at Aston Martin Lagonda Global Holdings' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Aston Martin Lagonda Global Holdings that you should be aware of.

If these risks are making you reconsider your opinion on Aston Martin Lagonda Global Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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

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.