Take Care Before Jumping Onto LanzaTech Global, Inc. (NASDAQ:LNZA) Even Though It's 29% Cheaper

Unfortunately for some shareholders, the LanzaTech Global, Inc. (NASDAQ:LNZA) share price has dived 29% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 83% loss during that time.

Although its price has dipped substantially, there still wouldn't be many who think LanzaTech Global's price-to-sales (or "P/S") ratio of 1.7x is worth a mention when the median P/S in the United States' Commercial Services industry is similar at about 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for LanzaTech Global

What Does LanzaTech Global's Recent Performance Look Like?

There hasn't been much to differentiate LanzaTech Global's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. Those who are bullish on LanzaTech Global will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

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

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

If we review the last year of revenue growth, the company posted a worthy increase of 8.0%. The latest three year period has also seen an excellent 128% 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.

Looking ahead now, revenue is anticipated to climb by 66% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 8.2%, which is noticeably less attractive.

With this information, we find it interesting that LanzaTech Global is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

With its share price dropping off a cliff, the P/S for LanzaTech Global looks to be in line with the rest of the Commercial Services 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 LanzaTech Global's 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You need to take note of risks, for example - LanzaTech Global has 3 warning signs (and 2 which are potentially serious) we think 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.