Capital Clean Energy Carriers Corp.'s (NASDAQ:CCEC) price-to-sales (or "P/S") ratio of 2.9x may look like a poor investment opportunity when you consider close to half the companies in the Shipping industry in the United States have P/S ratios below 0.7x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Capital Clean Energy Carriers
How Capital Clean Energy Carriers Has Been Performing
With revenue growth that's inferior to most other companies of late, Capital Clean Energy Carriers has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Capital Clean Energy Carriers .What Are Revenue Growth Metrics Telling Us About The High P/S?
In order to justify its P/S ratio, Capital Clean Energy Carriers would need to produce outstanding growth that's well in excess of the industry.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow revenue by an impressive 100% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.
Looking ahead now, revenue is anticipated to climb by 26% each year during the coming three years according to the six analysts following the company. That's shaping up to be materially higher than the 6.2% each year growth forecast for the broader industry.
With this in mind, it's not hard to understand why Capital Clean Energy Carriers' 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 Does Capital Clean Energy Carriers' P/S Mean For Investors?
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our look into Capital Clean Energy Carriers 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.
Plus, you should also learn about these 4 warning signs we've spotted with Capital Clean Energy Carriers (including 3 which can't be ignored).
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.