Origin Materials, Inc.'s (NASDAQ:ORGN) Share Price Is Still Matching Investor Opinion Despite 32% Slump

Unfortunately for some shareholders, the Origin Materials, Inc. (NASDAQ:ORGN) share price has dived 32% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

In spite of the heavy fall in price, when almost half of the companies in the United States' Chemicals industry have price-to-sales ratios (or "P/S") below 1.1x, you may still consider Origin Materials as a stock probably not worth researching with its 2.4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Origin Materials

How Has Origin Materials Performed Recently?

While the industry has experienced revenue growth lately, Origin Materials' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

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

How Is Origin Materials' Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Origin Materials' 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 12%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 108% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 9.9%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Origin Materials' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Origin Materials' P/S Mean For Investors?

There's still some elevation in Origin Materials' P/S, even if the same can't be said for its share price recently. 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.

As we suspected, our examination of Origin Materials' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Origin Materials that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.