Market Cool On Flotek Industries, Inc.'s (NYSE:FTK) Revenues Pushing Shares 30% Lower
Unfortunately for some shareholders, the Flotek Industries, Inc. (NYSE:FTK) share price has dived 30% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 48% share price drop.
Since its price has dipped substantially, considering around half the companies operating in the United States' Chemicals industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Flotek Industries as an solid investment opportunity with its 0.4x P/S ratio. 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 Flotek Industries
What Does Flotek Industries' P/S Mean For Shareholders?
Flotek Industries 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 Flotek Industries will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Flotek Industries?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Flotek Industries' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 215% gain to the company's top line. As a result, it also grew revenue by 14% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.
Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 70% over the next year. That's shaping up to be materially higher than the 2.1% growth forecast for the broader industry.
With this in consideration, we find it intriguing that Flotek Industries' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
What We Can Learn From Flotek Industries' P/S?
Flotek Industries' P/S has taken a dip along with its share price. 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.
To us, it seems Flotek Industries currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
It is also worth noting that we have found 4 warning signs for Flotek Industries that you need to take into consideration.
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.
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