Investors Give Fisker Inc. (NYSE:FSR) Shares A 40% Hiding

Unfortunately for some shareholders, the Fisker Inc. (NYSE:FSR) share price has dived 40% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 94% loss during that time.

After such a large drop in price, Fisker's price-to-sales (or "P/S") ratio of 1x might make it look like a buy right now compared to the Auto industry in the United States, where around half of the companies have P/S ratios above 3x and even P/S above 12x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Fisker

How Fisker Has Been Performing

Fisker certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Fisker's to be considered reasonable.

Retrospectively, the last year delivered an explosive gain to the company's top line. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 153% each year as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 26% per annum, which is noticeably less attractive.

With this information, we find it odd that Fisker is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

The southerly movements of Fisker's shares means its P/S is now sitting at a pretty low level. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Fisker's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Fisker (2 are significant!) that you need to be mindful of.

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.