Not Many Are Piling Into Cenntro Inc. (NASDAQ:CENN) Stock Yet As It Plummets 26%

Unfortunately for some shareholders, the Cenntro Inc. (NASDAQ:CENN) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 87% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think Cenntro's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in the United States' Auto industry is similar at about 1.1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Check out our latest analysis for Cenntro

What Does Cenntro's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Cenntro over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Cenntro's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Cenntro?

Cenntro's 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.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. Still, the latest three year period has seen an excellent 82% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 11% shows it's noticeably more attractive.

With this information, we find it interesting that Cenntro is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Following Cenntro'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 didn't quite envision Cenntro's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 5 warning signs for Cenntro (4 can't be ignored!) that you should be aware of.

If you're unsure about the strength of Cenntro's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.