Positive Sentiment Still Eludes Rekor Systems, Inc. (NASDAQ:REKR) Following 30% Share Price Slump

Unfortunately for some shareholders, the Rekor Systems, Inc. (NASDAQ:REKR) share price has dived 30% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 72% loss during that time.

After such a large drop in price, Rekor Systems may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.8x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 5x and even P/S higher than 12x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Rekor Systems

What Does Rekor Systems' Recent Performance Look Like?

Rekor Systems 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 Rekor Systems will help you uncover what's on the horizon.

How Is Rekor Systems' Revenue Growth Trending?

In order to justify its P/S ratio, Rekor Systems 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 44%. Pleasingly, revenue has also lifted 214% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 36% during the coming year according to the dual analysts following the company. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Rekor Systems' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Rekor Systems' P/S

Shares in Rekor Systems have plummeted and its P/S has followed suit. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To us, it seems Rekor Systems currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Rekor Systems (1 is concerning!) that you should be aware of before investing here.

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.