A Piece Of The Puzzle Missing From Clean Energy Fuels Corp.'s (NASDAQ:CLNE) Share Price

With a median price-to-sales (or "P/S") ratio of close to 1.8x in the Oil and Gas industry in the United States, you could be forgiven for feeling indifferent about Clean Energy Fuels Corp.'s (NASDAQ:CLNE) P/S ratio of 1.5x. 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.

See our latest analysis for Clean Energy Fuels

What Does Clean Energy Fuels' P/S Mean For Shareholders?

Clean Energy Fuels has been struggling lately as its revenue has declined faster than most other companies. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

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

Clean Energy Fuels' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.3%. Still, the latest three year period has seen an excellent 73% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 25% per annum as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 3.5% per year growth forecast for the broader industry.

In light of this, it's curious that Clean Energy Fuels' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Clean Energy Fuels' 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.

Looking at Clean Energy Fuels' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Clean Energy Fuels with six simple checks will allow you to discover any risks that could be an issue.

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

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.