EVgo, Inc. (NASDAQ:EVGO) Stocks Pounded By 27% But Not Lagging Industry On Growth Or Pricing

Unfortunately for some shareholders, the EVgo, Inc. (NASDAQ:EVGO) share price has dived 27% in the last thirty days, prolonging recent pain. Longer-term, the stock has been solid despite a difficult 30 days, gaining 23% in the last year.

Even after such a large drop in price, when almost half of the companies in the United States' Specialty Retail industry have price-to-sales ratios (or "P/S") below 0.4x, you may still consider EVgo as a stock probably not worth researching with its 1.4x 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 as high as it is.

See our latest analysis for EVgo

What Does EVgo's P/S Mean For Shareholders?

EVgo certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, EVgo would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 73%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 37% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 5.4% per annum, which is noticeably less attractive.

With this information, we can see why EVgo is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

EVgo's P/S remain high even after its stock plunged. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into EVgo shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

It is also worth noting that we have found 2 warning signs for EVgo that you need to take into consideration.

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.