AHT Syngas Technology NV (FRA:3SQ1) shares are down 33% but are not lagging behind the industry in terms of growth or price.

of AHT Syngas Technologies NV (FRA:3SQ1) shares have performed very poorly over the last month, dropping a massive 33%. For long term shareholders, last month was the final month of a year to forget, with the share price falling 55%.

Despite the large share price decline, and considering that roughly half of the companies in the German construction industry have a P/S ratio below 0.1, AHT Syngas Technology’s P/S ratio of 2.5x could be considered a stock to avoid altogether. However, there are potential explanations for why the P/S is so high, so it would be unwise to take it at face value.

Read our latest analysis on AHT Syngas Technology

How has AHT Syngas Technology performed recently?

AHT Syngas Technology has certainly been doing well recently, with earnings growing faster than most other companies. Many seem to expect this strong earnings performance to continue, which is driving the P/S ratio up. However, if it doesn’t, investors may be overbuying the stock.

Want a complete look at what analysts are forecasting for the company? free The AHT Syngas Technology report will help you understand what is coming next.

What is the revenue growth trend for AHT Syngas Technology?

There is an inherent assumption that for a P/S ratio like AHT Syngas Technology’s to be considered reasonable, the company must perform significantly better than its industry.

Looking back first, we can see that the company’s revenue has grown rapidly over the past 12 months. Amazingly, thanks to the incredible growth over the past 12 months, its three-year revenue growth also stunned the world. So shareholders will be thrilled with the medium-term revenue growth rate.

Looking to the future, analysts covering the company are forecasting that revenue will grow 44% per year over the next three years, compared to the wider industry which is forecast to grow at just 8.0% per year, which is decidedly less attractive.

With this information, we can see why AHT Syngas Technology is trading at such a high P/S relative to the industry – most investors are expecting this strong future growth and are likely willing to pay more for this stock.

The last word

Even after such a large share price decline, AHT Syngas Technology’s P/S is still well above the industry average.The power of the price-to-sales multiple is not primarily as a valuation tool, but rather as a way to gauge current investor sentiment and future expectations.

As expected, AHT Syngas Technology is forecasting higher earnings growth than other companies in the construction industry, which has allowed it to maintain a high P/S ratio. Currently, shareholders are comfortable with the P/S as they are confident that future earnings will not be threatened. As long as these conditions remain unchanged, the share price will continue to be strongly supported.

I don’t want to spoil the parade too much, 2 warning signs for AHT syngas technology (Number 1 is a bit worrying!) Caution is advised.

of course, Profitable companies with a track record of strong earnings growth are generally safe investments.So you might want to take a look at this free A collection of other companies with reasonable P/E ratios and strong earnings growth.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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