Complete Solaria, Inc. (NASDAQ:CSLR) Shares Slammed 26% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, Complete Solaria, Inc. (NASDAQ:CSLR) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Still, a bad month hasn't completely ruined the past year with the stock gaining 30%, which is great even in a bull market.

Although its price has dipped substantially, given close to half the companies operating in the United States' Electrical industry have price-to-sales ratios (or "P/S") below 1.6x, you may still consider Complete Solaria as a stock to potentially avoid with its 2.4x 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 Complete Solaria

What Does Complete Solaria's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Complete Solaria's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely 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 Complete Solaria.

Do Revenue Forecasts Match The High P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 52%. As a result, revenue from three years ago have also fallen 41% overall. 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 168% per year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 21% per annum, which is noticeably less attractive.

With this information, we can see why Complete Solaria is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Complete Solaria's P/S?

Despite the recent share price weakness, Complete Solaria's P/S remains higher than most other companies in the industry. 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.

We've established that Complete Solaria maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electrical industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Complete Solaria (2 are potentially serious!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.