Atlantica Sustainable Infrastructure plc's (NASDAQ:AY) P/S Is Still On The Mark Following 26% Share Price Bounce

The Atlantica Sustainable Infrastructure plc (NASDAQ:AY) share price has done very well over the last month, posting an excellent gain of 26%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 13% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Atlantica Sustainable Infrastructure's price-to-sales (or "P/S") ratio of 2.4x is worth a mention when it essentially matches the median P/S in the United States' Renewable Energy industry. 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 Atlantica Sustainable Infrastructure

What Does Atlantica Sustainable Infrastructure's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Atlantica Sustainable Infrastructure has been doing quite well of late. One possibility is that the P/S ratio is moderate because investors think the company's revenue will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Atlantica Sustainable Infrastructure.

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

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. The longer-term trend has been no better as the company has no revenue growth to show for over the last three years either. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

Turning to the outlook, the next three years should generate growth of 5.3% per annum as estimated by the seven analysts watching the company. With the industry predicted to deliver 6.8% growth per year, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Atlantica Sustainable Infrastructure's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Atlantica Sustainable Infrastructure's P/S

Atlantica Sustainable Infrastructure appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

A Atlantica Sustainable Infrastructure's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Renewable Energy industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Atlantica Sustainable Infrastructure (1 shouldn't be ignored) you should be aware of.

If you're unsure about the strength of Atlantica Sustainable Infrastructure'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.