What You Can Learn From Freight Technologies, Inc.'s (NASDAQ:FRGT) P/S After Its 43% Share Price Crash

Unfortunately for some shareholders, the Freight Technologies, Inc. (NASDAQ:FRGT) share price has dived 43% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 95% loss during that time.

Even after such a large drop in price, you could still be forgiven for thinking Freight Technologies is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.1x, considering almost half the companies in the United States' Logistics industry have P/S ratios below 0.7x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Freight Technologies

What Does Freight Technologies' Recent Performance Look Like?

Freight Technologies has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Freight Technologies' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 85% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 140% as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 5.3%, which is noticeably less attractive.

In light of this, it's understandable that Freight Technologies' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Freight Technologies' P/S Mean For Investors?

A significant share price dive has done very little to deflate Freight Technologies' very lofty P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Freight Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Freight Technologies (of which 1 can't be ignored!) you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com