Revenues Not Telling The Story For Twin Vee Powercats Co. (NASDAQ:VEEE) After Shares Rise 26%

The Twin Vee Powercats Co. (NASDAQ:VEEE) share price has done very well over the last month, posting an excellent gain of 26%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Twin Vee Powercats' P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Leisure industry in the United States is also close to 0.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for Twin Vee Powercats

What Does Twin Vee Powercats' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Twin Vee Powercats over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Twin Vee Powercats' earnings, revenue and cash flow.

How Is Twin Vee Powercats' Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 35%. The last three years don't look nice either as the company has shrunk revenue by 52% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 4.8% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that Twin Vee Powercats' P/S exceeds that of its industry peers. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Twin Vee Powercats' P/S Mean For Investors?

Twin Vee Powercats appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We find it unexpected that Twin Vee Powercats trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Twin Vee Powercats, and understanding these should be part of your investment process.

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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.