Why Investors Shouldn't Be Surprised By Alpine 4 Holdings, Inc.'s (NASDAQ:ALPP) 26% Share Price Plunge

To the annoyance of some shareholders, Alpine 4 Holdings, Inc. (NASDAQ:ALPP) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 81% share price decline.

Following the heavy fall in price, Alpine 4 Holdings' price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Electronic industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Alpine 4 Holdings

How Alpine 4 Holdings Has Been Performing

Alpine 4 Holdings 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 the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Alpine 4 Holdings will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Alpine 4 Holdings?

The only time you'd be truly comfortable seeing a P/S as low as Alpine 4 Holdings' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 227% overall rise in revenue, aided by its short-term performance. 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 6.3% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

In light of this, it's understandable that Alpine 4 Holdings' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The southerly movements of Alpine 4 Holdings' shares means its P/S is now sitting at a pretty low level. 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.

As expected, our analysis of Alpine 4 Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

You should always think about risks. Case in point, we've spotted 5 warning signs for Alpine 4 Holdings you should be aware of, and 3 of them make us uncomfortable.

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.