NaaS Technology Inc.'s (NASDAQ:NAAS) Popularity With Investors Under Threat As Stock Sinks 34%

To the annoyance of some shareholders, NaaS Technology Inc. (NASDAQ:NAAS) shares are down a considerable 34% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 98% loss during that time.

In spite of the heavy fall in price, it's still not a stretch to say that NaaS Technology's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Specialty Retail industry in the United States, where the median P/S ratio is around 0.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for NaaS Technology

What Does NaaS Technology's P/S Mean For Shareholders?

Recent times have been advantageous for NaaS Technology as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is NaaS Technology's Revenue Growth Trending?

In order to justify its P/S ratio, NaaS Technology would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 26% as estimated by the one analyst watching the company. With the industry predicted to deliver 4.9% growth, that's a disappointing outcome.

With this information, we find it concerning that NaaS Technology is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Final Word

With its share price dropping off a cliff, the P/S for NaaS Technology looks to be in line with the rest of the Specialty Retail industry. 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.

While NaaS Technology's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

We don't want to rain on the parade too much, but we did also find 4 warning signs for NaaS Technology (3 are a bit unpleasant!) that you need to be mindful of.

If you're unsure about the strength of NaaS Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.