Luminar Technologies, Inc. (NASDAQ:LAZR) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, Luminar Technologies, Inc. (NASDAQ:LAZR) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 85% share price decline.

Even after such a large drop in price, when almost half of the companies in the United States' Auto Components industry have price-to-sales ratios (or "P/S") below 0.8x, you may still consider Luminar Technologies as a stock probably not worth researching with its 2.2x 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 as high as it is.

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Check out our latest analysis for Luminar Technologies

How Luminar Technologies Has Been Performing

While the industry has experienced revenue growth lately, Luminar Technologies' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Luminar Technologies will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Luminar Technologies would need to produce impressive growth in excess of the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.2%. Even so, admirably revenue has lifted 95% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 61% each year as estimated by the four analysts watching the company. With the industry only predicted to deliver 17% each year, the company is positioned for a stronger revenue result.

With this information, we can see why Luminar Technologies is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Luminar Technologies' P/S Mean For Investors?

Despite the recent share price weakness, Luminar Technologies' P/S remains higher than most other companies in the industry. 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.

We've established that Luminar Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Auto Components industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Luminar Technologies (of which 2 are concerning!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.