Soluna Holdings, Inc. (NASDAQ:SLNH) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month.    The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.  

Following the heavy fall in price, Soluna Holdings may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.4x and even P/S higher than 11x aren't out of the ordinary.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.  

NasdaqCM:SLNH Price to Sales Ratio vs Industry April 6th 2024

How Has Soluna Holdings Performed Recently?

For instance, Soluna Holdings' receding revenue in recent times would have to be some food for thought.   Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer.  However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.    

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Soluna Holdings will help you shine a light on its historical performance.  

How Is Soluna Holdings' Revenue Growth Trending?  

The only time you'd be truly comfortable seeing a P/S as depressed as Soluna Holdings' is when the company's growth is on track to lag the industry decidedly.  

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line.   In spite of this, the company still managed to deliver immense revenue growth over the last three years.  Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.  

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it odd that Soluna Holdings is trading at a P/S lower than the industry.  Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.  

The Key Takeaway

Soluna Holdings' P/S looks about as weak as its stock price lately.      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.

Our examination of Soluna Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations.  When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio.  It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.    

Plus, you should also learn about these 5 warning signs we've spotted with Soluna Holdings (including 4 which make us uncomfortable).  

If you're unsure about the strength of Soluna Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.