Beam Global (NASDAQ:BEEM) Might Not Be As Mispriced As It Looks

Beam Global's (NASDAQ:BEEM) price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Electrical industry in the United States, where around half of the companies have P/S ratios above 2.4x and even P/S above 6x 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.

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Check out our latest analysis for Beam Global

What Does Beam Global's Recent Performance Look Like?

Beam Global could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Beam Global?

In order to justify its P/S ratio, Beam Global would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 40% decrease to the company's top line. Even so, admirably revenue has lifted 261% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 14% per year, which is not materially different.

With this information, we find it odd that Beam Global is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Beam Global remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Beam Global, and understanding these should be part of your investment process.

If you're unsure about the strength of Beam Global'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.