Fewer Investors Than Expected Jumping On Aemetis, Inc. (NASDAQ:AMTX)

You may think that with a price-to-sales (or "P/S") ratio of 0.4x Aemetis, Inc. (NASDAQ:AMTX) is a stock worth checking out, seeing as almost half of all the Oil and Gas companies in the United States have P/S ratios greater than 1.8x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Aemetis

What Does Aemetis' P/S Mean For Shareholders?

Recent times have been pleasing for Aemetis as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. Those who are bullish on Aemetis will be hoping that this isn't the case and the company continues to beat out the industry.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 60%. The strong recent performance means it was also able to grow revenue by 58% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 47% each year during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 2.4% per annum, which is noticeably less attractive.

With this information, we find it odd that Aemetis is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Aemetis' P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Aemetis' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Aemetis (2 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Aemetis, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.