Not Many Are Piling Into Intuitive Machines, Inc. (NASDAQ:LUNR) Stock Yet As It Plummets 25%

Unfortunately for some shareholders, the Intuitive Machines, Inc. (NASDAQ:LUNR) share price has dived 25% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 77% loss during that time.

Following the heavy fall in price, it would be understandable if you think Intuitive Machines is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.6x, considering almost half the companies in the United States' Aerospace & Defense industry have P/S ratios above 2.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Intuitive Machines

How Intuitive Machines Has Been Performing

With revenue growth that's superior to most other companies of late, Intuitive Machines has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Intuitive Machines.

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

Intuitive Machines' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. Pleasingly, revenue has also lifted 96% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 49% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 8.2% per year, which is noticeably less attractive.

With this information, we find it odd that Intuitive Machines is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Intuitive Machines' P/S?

Intuitive Machines' recently weak share price has pulled its P/S back below other Aerospace & Defense companies. 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.

Intuitive Machines' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Intuitive Machines is showing 5 warning signs in our investment analysis, and 3 of those are significant.

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.