A Piece Of The Puzzle Missing From Redwire Corporation's (NYSE:RDW) 26% Share Price Climb

Despite an already strong run, Redwire Corporation (NYSE:RDW) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 143% in the last year.

In spite of the firm bounce in price, it would still be understandable if you think Redwire is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.8x, considering almost half the companies in the United States' Aerospace & Defense industry have P/S ratios above 2.3x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Redwire

What Does Redwire's P/S Mean For Shareholders?

Recent times have been advantageous for Redwire as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Redwire's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Redwire's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 48%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% each year during the coming three years according to the five analysts following the company. That's shaping up to be materially higher than the 2.6% per annum growth forecast for the broader industry.

In light of this, it's peculiar that Redwire's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Redwire's P/S

The latest share price surge wasn't enough to lift Redwire's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Redwire's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 1 warning sign for Redwire that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com