The Price Is Right For Lotus Technology Inc. (NASDAQ:LOT) Even After Diving 27%

Unfortunately for some shareholders, the Lotus Technology Inc. (NASDAQ:LOT) share price has dived 27% in the last thirty days, prolonging recent pain. 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 0.8x, you may still consider Lotus Technology as a stock probably not worth researching with its 1.7x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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 the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

Lotus Technology's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 213%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 48% per year as estimated by the one analyst watching the company. With the industry only predicted to deliver 17% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Lotus Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Lotus Technology's P/S?

Lotus Technology's P/S remain high even after its stock plunged. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Lotus Technology's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 3 warning signs for Lotus Technology (2 are potentially serious!) that we have uncovered.

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

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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.