The Aemetis, Inc. (NASDAQ:AMTX) share price has softened a substantial 34% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 41% in that time.

Following the heavy fall in price, Aemetis' price-to-sales (or "P/S") ratio of 0.5x might make it look like a buy right now compared to the Oil and Gas industry in the United States, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

How Has Aemetis Performed Recently?

Recent times have been pleasing for Aemetis as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. Those who are bullish on Aemetis will be hoping that this isn't the case and the company continues to beat out the industry.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Aemetis would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 60% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 58% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 47% per annum during the coming three years according to the seven analysts following the company. With the industry only predicted to deliver 2.5% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Aemetis' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

The southerly movements of Aemetis' shares means its P/S is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Aemetis' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware Aemetis is showing 4 warning signs in our investment analysis, and 2 of those are a bit unpleasant.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.