LiqTech International, Inc. (NASDAQ:LIQT) Stock Rockets 29% But Many Are Still Ignoring The Company

Despite an already strong run, LiqTech International, Inc. (NASDAQ:LIQT) shares have been powering on, with a gain of 29% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Even after such a large jump in price, there still wouldn't be many who think LiqTech International's price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in the United States' Machinery industry is similar at about 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for LiqTech International

What Does LiqTech International's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, LiqTech International has been very sluggish. One possibility is that the P/S is moderate because investors think the company's revenue trend will eventually fall in line with most others in the industry. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, then existing shareholders may be a little nervous about the viability of the share price.

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Is There Some Revenue Growth Forecasted For LiqTech International?

In order to justify its P/S ratio, LiqTech International would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 18% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 36% over the next year. With the industry only predicted to deliver 2.5%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that LiqTech International's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Its shares have lifted substantially and now LiqTech International's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that LiqTech International currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you take the next step, you should know about the 5 warning signs for LiqTech International (2 are potentially serious!) that we have uncovered.

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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.