Lotus Technology Inc.'s (NASDAQ:LOT) Share Price Is Still Matching Investor Opinion Despite 26% Slump

To the annoyance of some shareholders, Lotus Technology Inc. (NASDAQ:LOT) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

In spite of the heavy fall in price, when almost half of the companies in the United States' Auto industry have price-to-sales ratios (or "P/S") below 1x, you may still consider Lotus Technology 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.

See our latest analysis for Lotus Technology

What Does Lotus Technology's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Lotus Technology has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Lotus Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Lotus Technology?

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

Retrospectively, the last year delivered an exceptional 213% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 48% per year during the coming three years according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 16% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Lotus Technology's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Despite the recent share price weakness, Lotus Technology's 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 Lotus Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Auto industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Lotus Technology (2 are a bit concerning!) that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.