Revenues Tell The Story For Altus Power, Inc. (NYSE:AMPS) As Its Stock Soars 29%

Simply Wall St ·  Dec 16, 2023 07:02

Altus Power, Inc. (NYSE:AMPS) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.6% in the last twelve months.

After such a large jump in price, given around half the companies in the United States' Renewable Energy industry have price-to-sales ratios (or "P/S") below 2.3x, you may consider Altus Power as a stock to avoid entirely with its 6.9x P/S ratio. 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 Altus Power

NYSE:AMPS Price to Sales Ratio vs Industry December 16th 2023

How Altus Power Has Been Performing

Recent times have been advantageous for Altus Power as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Altus Power will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

Altus Power'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.

Taking a look back first, we see that the company grew revenue by an impressive 54% last year. The latest three year period has also seen an excellent 226% 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 44% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 18%, which is noticeably less attractive.

With this information, we can see why Altus Power is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Altus Power's P/S?

Shares in Altus Power have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 Altus Power shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - Altus Power has 3 warning signs (and 2 which can't be ignored) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

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