The Market Doesn't Like What It Sees From Alpine 4 Holdings, Inc.'s (NASDAQ:ALPP) Revenues Yet As Shares Tumble 26%
To the annoyance of some shareholders, Alpine 4 Holdings, Inc. (NASDAQ:ALPP) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 81% loss during that time.
Since its price has dipped substantially, Alpine 4 Holdings' price-to-sales (or "P/S") ratio of 0.4x might make it look like a buy right now compared to the Electronic industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 5x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
View our latest analysis for Alpine 4 Holdings
How Alpine 4 Holdings Has Been Performing
With revenue growth that's superior to most other companies of late, Alpine 4 Holdings has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Alpine 4 Holdings.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as Alpine 4 Holdings' is when the company's growth is on track to lag the industry.
Taking a look back first, we see that the company grew revenue by an impressive 33% last year. The strong recent performance means it was also able to grow revenue by 227% in total over the last three years. 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 6.3% during the coming year according to the lone analyst following the company. That's shaping up to be materially lower than the 11% growth forecast for the broader industry.
With this information, we can see why Alpine 4 Holdings is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What Does Alpine 4 Holdings' P/S Mean For Investors?
Alpine 4 Holdings' recently weak share price has pulled its P/S back below other Electronic companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
As expected, our analysis of Alpine 4 Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.
It is also worth noting that we have found 5 warning signs for Alpine 4 Holdings (3 don't sit too well with us!) that you need to take into consideration.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
