Bloom Energy Corporation's (NYSE:BE) 31% Cheaper Price Remains In Tune With Revenues

The Bloom Energy Corporation (NYSE:BE) share price has fared very poorly over the last month, falling by a substantial 31%. Looking at the bigger picture, even after this poor month the stock is up 42% in the last year.

In spite of the heavy fall in price, 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 Bloom Energy as a stock to potentially avoid with its 2.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for Bloom Energy

How Bloom Energy Has Been Performing

With revenue growth that's superior to most other companies of late, Bloom Energy has been doing relatively well. 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.

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

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

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

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. Pleasingly, revenue has also lifted 52% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 21% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 16% per annum, which is noticeably less attractive.

With this information, we can see why Bloom Energy is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Bloom Energy's P/S

Bloom Energy's P/S remain high even after its stock plunged. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Bloom Energy 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. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You always need to take note of risks, for example - Bloom Energy has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Bloom Energy, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.