To the annoyance of some shareholders, Jet.AI Inc. (NASDAQ:JTAI) shares are down a considerable 45% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 96% loss during that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Jet.AI's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Airlines industry in the United States is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does Jet.AI's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Jet.AI's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Some Revenue Growth Forecasted For Jet.AI?

The only time you'd be comfortable seeing a P/S like Jet.AI's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 23%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 17% over the next year. With the industry predicted to deliver 52% growth, the company is positioned for a weaker revenue result.

In light of this, it's curious that Jet.AI's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Jet.AI looks to be in line with the rest of the Airlines industry. 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 at the analysts forecasts of Jet.AI's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You should always think about risks. Case in point, we've spotted 6 warning signs for Jet.AI you should be aware of, and 5 of them are significant.

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.