Market Cool On eEnergy Group Plc's (LON:EAAS) Revenues Pushing Shares 26% Lower

eEnergy Group Plc (LON:EAAS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 30% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about eEnergy Group's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Commercial Services industry in the United Kingdom is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for eEnergy Group

How Has eEnergy Group Performed Recently?

With revenue growth that's superior to most other companies of late, eEnergy Group has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on eEnergy Group.

Is There Some Revenue Growth Forecasted For eEnergy Group?

There's an inherent assumption that a company should be matching the industry for P/S ratios like eEnergy Group's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 43% last year. Pleasingly, revenue has also lifted 53% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 12% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 1.3%, which is noticeably less attractive.

In light of this, it's curious that eEnergy Group's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Following eEnergy Group's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that eEnergy Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 3 warning signs for eEnergy Group (1 is potentially serious!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.