American Superconductor Corporation (NASDAQ:AMSC) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. The last month tops off a massive increase of 248% in the last year.

After such a large jump in price, when almost half of the companies in the United States' Electrical industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider American Superconductor as a stock not worth researching with its 6.1x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How Has American Superconductor Performed Recently?

With revenue growth that's superior to most other companies of late, American Superconductor has been doing relatively well. 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.

How Is American Superconductor's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like American Superconductor's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. Pleasingly, revenue has also lifted 70% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 39% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

In light of this, it's understandable that American Superconductor's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From American Superconductor's P/S?

Shares in American Superconductor have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 look into American Superconductor 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.

Having said that, be aware American Superconductor is showing 2 warning signs in our investment analysis, 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.