---
title: "Why We're Not Concerned Yet About Red Cat Holdings, Inc.'s (NASDAQ:RCAT) 34% Share Price Plunge"
description: "Red Cat Holdings, Inc. (NASDAQ:RCAT) shares have dropped 34% recently, but this decline is minor compared to a 1,294% increase over the past year. The company's high price-to-sales (P/S) ratio of 45.5"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/226705733.md"
published_at: "2025-01-30T17:01:00.000Z"
---

# Why We're Not Concerned Yet About Red Cat Holdings, Inc.'s (NASDAQ:RCAT) 34% Share Price Plunge

> Red Cat Holdings, Inc. (NASDAQ:RCAT) shares have dropped 34% recently, but this decline is minor compared to a 1,294% increase over the past year. The company's high price-to-sales (P/S) ratio of 45.5x suggests strong revenue growth expectations, as it has seen a 95% revenue increase last year and is projected to grow by 325% next year. Despite the recent price drop, investor confidence in future revenues keeps the P/S elevated, indicating potential stability in share prices. However, there are risks to consider, including identified warning signs for the company.

**Red Cat Holdings, Inc.** (NASDAQ:RCAT) shares have retraced a considerable 34% in the last month, reversing a fair amount of their solid recent performance. Regardless, last month's decline is barely a blip on the stock's price chart as it has gained a monstrous 1,294% in the last year.

In spite of the heavy fall in price, you could still be forgiven for thinking Red Cat Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 45.5x, considering almost half the companies in the United States' Electronic industry have P/S ratios below 2.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Red Cat Holdings

### How Has Red Cat Holdings Performed Recently?

Recent times have been advantageous for Red Cat Holdings as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our **free** report on Red Cat Holdings will help you uncover what's on the horizon.

## How Is Red Cat Holdings' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Red Cat Holdings' is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 95% last year. The latest three year period has also seen an excellent 126% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 325% during the coming year according to the sole analyst following the company. With the industry only predicted to deliver 9.5%, the company is positioned for a stronger revenue result.

With this information, we can see why Red Cat Holdings is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

## What Does Red Cat Holdings' P/S Mean For Investors?

Red Cat Holdings' shares may have suffered, but its P/S remains high. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Red Cat Holdings 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified **2 warning signs for Red Cat Holdings** (1 is potentially serious) you should be aware of.

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.

### Related Stocks

- [RCAT.US - Red Cat](https://longbridge.com/en/quote/RCAT.US.md)
- [CAT.US - Caterpillar](https://longbridge.com/en/quote/CAT.US.md)

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
