Intuitive Machines, Inc.'s (NASDAQ:LUNR) P/S Is Still On The Mark Following 34% Share Price Bounce

Intuitive Machines, Inc. (NASDAQ:LUNR) shares have continued their recent momentum with a 34% gain in the last month alone. The annual gain comes to 219% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, when almost half of the companies in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider Intuitive Machines as a stock not worth researching with its 7.2x 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

How Intuitive Machines Has Been Performing

Intuitive Machines certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

If we review the last year of revenue growth, the company posted a terrific increase of 62%. The strong recent performance means it was also able to grow revenue by 189% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 29% each year over the next three years. With the industry only predicted to deliver 9.1% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Intuitive Machines' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Intuitive Machines' P/S Mean For Investors?

Shares in Intuitive Machines have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Intuitive Machines maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Aerospace & Defense industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Intuitive Machines (1 is significant!) that you need to take into consideration.

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.