Intuitive Machines, Inc.'s (NASDAQ:LUNR) 27% Cheaper Price Remains In Tune With Revenues

Intuitive Machines, Inc. (NASDAQ:LUNR) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 35% share price drop.

Even after such a large drop in price, given around half the companies in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 3x, you may still consider Intuitive Machines as a stock to avoid entirely with its 5.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Intuitive Machines

What Does Intuitive Machines' Recent Performance Look Like?

Intuitive Machines could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very 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 Intuitive Machines.

How Is Intuitive Machines' Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Intuitive Machines' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.8% last year. The latest three year period has also seen an excellent 217% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 74% per annum over the next three years. That's shaping up to be materially higher than the 10% each year growth forecast for the broader industry.

With this information, we can see why Intuitive Machines 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 Does Intuitive Machines' P/S Mean For Investors?

Intuitive Machines' shares may have suffered, but its P/S remains high. 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.

As we suspected, our examination of Intuitive Machines' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Intuitive Machines that you should be aware of.

If you're unsure about the strength of Intuitive Machines' 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.