Investors Aren't Entirely Convinced By Capstone Green Energy Corporation's (NASDAQ:CGRN) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 0.3x Capstone Green Energy Corporation (NASDAQ:CGRN) is a stock worth checking out, seeing as almost half of all the Electrical companies in the United States have P/S ratios greater than 1.9x and even P/S higher than 6x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Capstone Green Energy

How Has Capstone Green Energy Performed Recently?

Capstone Green Energy could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Capstone Green Energy'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?

The only time you'd be truly comfortable seeing a P/S as low as Capstone Green Energy's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.2% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 5.8% overall drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 34% each year during the coming three years according to the dual analysts following the company. That's shaping up to be similar to the 33% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Capstone Green Energy's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Capstone Green Energy's P/S

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.

Our examination of Capstone Green Energy's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Capstone Green Energy you should know about.

If these risks are making you reconsider your opinion on Capstone Green Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.