Positive Sentiment Still Eludes iLearningEngines, Inc. (NASDAQ:AILE) Following 31% Share Price Slump

iLearningEngines, Inc. (NASDAQ:AILE) shareholders that were waiting for something to happen have been dealt a blow with a 31% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 34% in that time.

Although its price has dipped substantially, iLearningEngines may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.4x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.1x and even P/S higher than 10x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for iLearningEngines

What Does iLearningEngines' Recent Performance Look Like?

iLearningEngines certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is iLearningEngines' Revenue Growth Trending?

iLearningEngines' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 36% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 174% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 27% per year during the coming three years according to the one analyst following the company. That's shaping up to be materially higher than the 15% per year growth forecast for the broader industry.

In light of this, it's peculiar that iLearningEngines' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does iLearningEngines' P/S Mean For Investors?

iLearningEngines' P/S has taken a dip along with its share price. 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.

To us, it seems iLearningEngines currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with iLearningEngines (at least 4 which shouldn't be ignored), and understanding these should be part of your investment process.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.