ChargePoint Holdings, Inc. (NYSE:CHPT) Looks Inexpensive After Falling 28% But Perhaps Not Attractive Enough

Unfortunately for some shareholders, the ChargePoint Holdings, Inc. (NYSE:CHPT) share price has dived 28% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 86% share price decline.

After such a large drop in price, ChargePoint Holdings may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Electrical industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for ChargePoint Holdings

How ChargePoint Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, ChargePoint Holdings has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ChargePoint Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, ChargePoint Holdings would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.2% last year. The latest three year period has also seen an excellent 246% overall rise in revenue, aided somewhat by its short-term performance. 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% each year over the next three years. With the industry predicted to deliver 34% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why ChargePoint Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On ChargePoint Holdings' P/S

ChargePoint Holdings' P/S has taken a dip along with its share price. 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.

As expected, our analysis of ChargePoint Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 4 warning signs for ChargePoint Holdings (of which 1 is significant!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.