To the annoyance of some shareholders, Dragonfly Energy Holdings Corp. (NASDAQ:DFLI) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 50% share price drop.

Since its price has dipped substantially, Dragonfly Energy Holdings may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Electrical industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 6x 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 limited.

What Does Dragonfly Energy Holdings' P/S Mean For Shareholders?

Dragonfly Energy Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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How Is Dragonfly Energy Holdings' Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 34%. This means it has also seen a slide in revenue over the longer-term as revenue is down 37% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 48% each year over the next three years. That's shaping up to be materially higher than the 26% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Dragonfly Energy Holdings' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Dragonfly Energy Holdings' P/S

Dragonfly Energy Holdings' recently weak share price has pulled its P/S back below other Electrical companies. 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.

A look at Dragonfly Energy Holdings' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant 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.

If these risks are making you reconsider your opinion on Dragonfly Energy Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.