Xiao-I Corporation (NASDAQ:AIXI) Stock's 29% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Unfortunately for some shareholders, the Xiao-I Corporation (NASDAQ:AIXI) share price has dived 29% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

After such a large drop in price, Xiao-I may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.3x and even P/S higher than 12x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Xiao-I

What Does Xiao-I's Recent Performance Look Like?

Xiao-I has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Xiao-I's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Xiao-I would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. The strong recent performance means it was also able to grow revenue by 116% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 21% shows it's noticeably more attractive.

With this information, we find it odd that Xiao-I is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does Xiao-I's P/S Mean For Investors?

Xiao-I's P/S looks about as weak as its stock price lately. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We're very surprised to see Xiao-I currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Having said that, be aware Xiao-I is showing 5 warning signs in our investment analysis, and 3 of those can't be ignored.

If these risks are making you reconsider your opinion on Xiao-I, 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.