SIMEC Atlantis Energy Limited (LON:SAE) Not Doing Enough For Some Investors As Its Shares Slump 27%

SIMEC Atlantis Energy Limited (LON:SAE) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 35% share price drop.

After such a large drop in price, SIMEC Atlantis Energy may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.4x, considering almost half of all companies in the Electrical industry in the United Kingdom have P/S ratios greater than 2.5x and even P/S higher than 15x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for SIMEC Atlantis Energy

What Does SIMEC Atlantis Energy's Recent Performance Look Like?

Recent times have been quite advantageous for SIMEC Atlantis Energy as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on SIMEC Atlantis Energy will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For SIMEC Atlantis Energy?

In order to justify its P/S ratio, SIMEC Atlantis Energy would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 208% last year. The latest three year period has also seen an excellent 36% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 65% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why SIMEC Atlantis Energy is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On SIMEC Atlantis Energy's P/S

SIMEC Atlantis Energy's P/S looks about as weak as its stock price lately. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of SIMEC Atlantis Energy revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

There are also other vital risk factors to consider and we've discovered 4 warning signs for SIMEC Atlantis Energy (2 shouldn't be ignored!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on SIMEC Atlantis Energy, 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.