Risks Still Elevated At These Prices As Jet.AI Inc. (NASDAQ:JTAI) Shares Dive 41%

Unfortunately for some shareholders, the Jet.AI Inc. (NASDAQ:JTAI) share price has dived 41% 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 98% share price decline.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Jet.AI's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Airlines industry in the United States is also close to 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Jet.AI

How Jet.AI Has Been Performing

Jet.AI certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

Keen to find out how analysts think Jet.AI's future stacks up against the industry? In that case, our free report is a great place to start.

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

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

If we review the last year of revenue growth, the company posted a terrific increase of 47%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible 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 4.1% during the coming year according to the lone analyst following the company. That's shaping up to be materially lower than the 82% growth forecast for the broader industry.

With this in mind, we find it intriguing that Jet.AI's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Jet.AI's P/S?

Jet.AI's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

When you consider that Jet.AI's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Jet.AI (at least 4 which make us uncomfortable), and understanding them should be part of your investment process.

If you're unsure about the strength of Jet.AI'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.