To the annoyance of some shareholders, Freight Technologies, Inc. (NASDAQ:FRGT) shares are down a considerable 43% 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 96% share price decline.

Although its price has dipped substantially, when almost half of the companies in the United States' Logistics industry have price-to-sales ratios (or "P/S") below 0.7x, you may still consider Freight Technologies as a stock probably not worth researching with its 2.2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does Freight Technologies' P/S Mean For Shareholders?

Recent times haven't been great for Freight Technologies as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Freight Technologies' is when the company's growth is on track to outshine the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 20%. Still, the latest three year period has seen an excellent 287% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 71% as estimated by the only analyst watching the company. With the industry only predicted to deliver 4.8%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Freight Technologies' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Freight Technologies' P/S?

Despite the recent share price weakness, Freight Technologies' P/S remains higher than most other companies in the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Freight Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Freight Technologies (of which 1 is potentially serious!) you should know about.

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.