AutoStore Holdings Ltd.'s (OB:AUTO) Popularity With Investors Under Threat As Stock Sinks 28%

Unfortunately for some shareholders, the AutoStore Holdings Ltd. (OB:AUTO) share price has dived 28% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 46% in that time.

Although its price has dipped substantially, when almost half of the companies in Norway's Machinery industry have price-to-sales ratios (or "P/S") below 1.5x, you may still consider AutoStore Holdings as a stock not worth researching with its 4.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for AutoStore Holdings

How AutoStore Holdings Has Been Performing

AutoStore Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For AutoStore Holdings?

The only time you'd be truly comfortable seeing a P/S as steep as AutoStore Holdings' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 1.1% decrease to the company's top line. Even so, admirably revenue has lifted 111% 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.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 12% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 20% per annum, which is noticeably more attractive.

With this information, we find it concerning that AutoStore Holdings is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Bottom Line On AutoStore Holdings' P/S

AutoStore Holdings' shares may have suffered, but its P/S remains high. 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.

We've concluded that AutoStore Holdings currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

And what about other risks? Every company has them, and we've spotted 1 warning sign for AutoStore Holdings you should know about.

If these risks are making you reconsider your opinion on AutoStore Holdings, 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.