NextPlat Corp (NASDAQ:NXPL) Shares Slammed 28% But Getting In Cheap Might Be Difficult Regardless
NextPlat Corp (NASDAQ:NXPL) shares have had a horrible month, losing 28% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 28% in that time.
Although its price has dipped substantially, you could still be forgiven for thinking NextPlat is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.7x, considering almost half the companies in the United States' Telecom industry have P/S ratios below 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
Check out our latest analysis for NextPlat
How NextPlat Has Been Performing
The recent revenue growth at NextPlat would have to be considered satisfactory if not spectacular. One possibility is that the P/S ratio is high because investors think this good revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our
free report on NextPlat
will help you shine a light on its historical performance.
How Is NextPlat's Revenue Growth Trending?
NextPlat's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 90% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that to the industry, which is only predicted to deliver 5.9% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
With this information, we can see why NextPlat is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.
The Final Word
NextPlat's shares may have suffered, but its P/S remains high. 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.
We've established that NextPlat maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.
There are also other vital risk factors to consider and we've discovered 3 warning signs for NextPlat (2 shouldn't be ignored!) that you should be aware of before investing here.
If you're unsure about the strength of NextPlat's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.??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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