Not Many Are Piling Into Alternus Energy Group Plc (OB:ALT) Stock Yet As It Plummets 26%

Alternus Energy Group Plc (OB:ALT) 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. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.

Since its price has dipped substantially, considering around half the companies operating in Norway's Renewable Energy industry have price-to-sales ratios (or "P/S") above 3.2x, you may consider Alternus Energy Group as an solid investment opportunity with its 1.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Alternus Energy Group

How Alternus Energy Group Has Been Performing

As an illustration, revenue has deteriorated at Alternus Energy Group over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Alternus Energy Group will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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

How Is Alternus Energy Group's Revenue Growth Trending?

In order to justify its P/S ratio, Alternus Energy Group would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 23% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

This is in contrast to the rest of the industry, which is expected to grow by 48% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Alternus Energy Group's P/S isn't as high compared to that of its industry peers. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Alternus Energy Group's P/S Mean For Investors?

The southerly movements of Alternus Energy Group's shares means its P/S is now sitting at a pretty low level. 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.

We're very surprised to see Alternus Energy Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 6 warning signs for Alternus Energy Group (of which 5 are a bit concerning!) you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.