Positive Sentiment Still Eludes Aspen Aerogels, Inc. (NYSE:ASPN) Following 34% Share Price Slump

To the annoyance of some shareholders, Aspen Aerogels, Inc. (NYSE:ASPN) shares are down a considerable 34% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

In spite of the heavy fall in price, it's still not a stretch to say that Aspen Aerogels' price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" compared to the Chemicals industry in the United States, where the median P/S ratio is around 1.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Aspen Aerogels

How Aspen Aerogels Has Been Performing

Aspen Aerogels certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

How Is Aspen Aerogels' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Aspen Aerogels' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 90% gain to the company's top line. The latest three year period has also seen an excellent 272% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% per year during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 4.6% per annum growth forecast for the broader industry.

In light of this, it's curious that Aspen Aerogels' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Aspen Aerogels' P/S

With its share price dropping off a cliff, the P/S for Aspen Aerogels looks to be in line with the rest of the Chemicals industry. 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.

We've established that Aspen Aerogels currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Aspen Aerogels is showing 1 warning sign in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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