Further Upside For Energy Vault Holdings, Inc. (NYSE:NRGV) Shares Could Introduce Price Risks After 29% Bounce

Despite an already strong run, Energy Vault Holdings, Inc. (NYSE:NRGV) shares have been powering on, with a gain of 29% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

In spite of the firm bounce in price, it's still not a stretch to say that Energy Vault Holdings' price-to-sales (or "P/S") ratio of 2.1x right now seems quite "middle-of-the-road" compared to the Electrical industry in the United States, where the median P/S ratio is around 1.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Energy Vault Holdings

How Has Energy Vault Holdings Performed Recently?

While the industry has experienced revenue growth lately, Energy Vault Holdings' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Energy Vault Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Energy Vault Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 60% decrease to the company's top line. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 142% over the next year. With the industry only predicted to deliver 22%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Energy Vault Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Energy Vault Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at Energy Vault Holdings' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Energy Vault Holdings (of which 1 doesn't sit too well with us!) you should know about.

If you're unsure about the strength of Energy Vault Holdings' 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.