Why Investors Shouldn't Be Surprised By Aspen Aerogels, Inc.'s (NYSE:ASPN) 32% Share Price Surge

Aspen Aerogels, Inc. (NYSE:ASPN) shares have had a really impressive month, gaining 32% after a shaky period beforehand. This latest share price bounce rounds out a remarkable 443% gain over the last twelve months.

Since its price has surged higher, when almost half of the companies in the United States' Chemicals industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Aspen Aerogels as a stock not worth researching with its 6.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Aspen Aerogels

What Does Aspen Aerogels' P/S Mean For Shareholders?

Aspen Aerogels certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Aspen Aerogels?

Aspen Aerogels' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 88% last year. Pleasingly, revenue has also lifted 234% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 32% each year as estimated by the nine analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 6.7% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Aspen Aerogels' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Aspen Aerogels' P/S

Shares in Aspen Aerogels have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Aspen Aerogels' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 3 warning signs for Aspen Aerogels (1 makes us a bit uncomfortable!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.