AmpliTech Group, Inc. (NASDAQ:AMPG) Stock's 28% Dive Might Signal An Opportunity But It Requires Some Scrutiny

The AmpliTech Group, Inc. (NASDAQ:AMPG) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Even after such a large drop in price, it's still not a stretch to say that AmpliTech Group's price-to-sales (or "P/S") ratio of 2.6x right now seems quite "middle-of-the-road" compared to the Electronic industry in the United States, where the median P/S ratio is around 2.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for AmpliTech Group

What Does AmpliTech Group's Recent Performance Look Like?

AmpliTech Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 26%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 239% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 32% over the next year. With the industry only predicted to deliver 9.7%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that AmpliTech Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

AmpliTech Group's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, AmpliTech Group's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you settle on your opinion, we've discovered 3 warning signs for AmpliTech Group (2 are a bit concerning!) that you should be aware of.

If you're unsure about the strength of AmpliTech Group'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.