Gogoro Inc. (NASDAQ:GGR) Surges 27% Yet Its Low P/S Is No Reason For Excitement

The Gogoro Inc. (NASDAQ:GGR) share price has done very well over the last month, posting an excellent gain of 27%. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 80% share price drop in the last twelve months.

In spite of the firm bounce in price, it would still be understandable if you think Gogoro is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in the United States' Auto industry have P/S ratios above 1.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Gogoro

How Has Gogoro Performed Recently?

Gogoro could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Gogoro's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. This means it has also seen a slide in revenue over the longer-term as revenue is down 24% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 1.3% as estimated by the sole analyst watching the company. That's not great when the rest of the industry is expected to grow by 7.0%.

With this in consideration, we find it intriguing that Gogoro's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Gogoro's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Gogoro's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Gogoro's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Before you take the next step, you should know about the 4 warning signs for Gogoro (1 is significant!) that we have uncovered.

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.