With A 26% Price Drop For Origin Materials, Inc. (NASDAQ:ORGN) You'll Still Get What You Pay For

Unfortunately for some shareholders, the Origin Materials, Inc. (NASDAQ:ORGN) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop has obliterated the annual return, with the share price now down 3.3% over that longer period.

In spite of the heavy fall in price, you could still be forgiven for thinking Origin Materials is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.9x, considering almost half the companies in the United States' Chemicals industry have P/S ratios below 1x. 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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See our latest analysis for Origin Materials

How Origin Materials Has Been Performing

With revenue growth that's superior to most other companies of late, Origin Materials has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Origin Materials will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Origin Materials?

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, we see that the company managed to grow revenues by a handy 8.6% last year. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 79% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 1.7% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Origin Materials' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Origin Materials' P/S

Origin Materials' P/S remain high even after its stock plunged. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Origin Materials shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 2 warning signs we've spotted with Origin Materials (including 1 which makes us a bit uncomfortable).

If these risks are making you reconsider your opinion on Origin Materials, 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.