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    Sunrun Inc. (NASDAQ:RUN) Held Back By Insufficient Growth Even After Shares Climb 26%

    Simply Wall St·04/29/2025 10:43:17
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    Sunrun Inc. (NASDAQ:RUN) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

    Although its price has surged higher, Sunrun may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Electrical industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

    We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

    See our latest analysis for Sunrun

    ps-multiple-vs-industry
    NasdaqGS:RUN Price to Sales Ratio vs Industry April 29th 2025

    What Does Sunrun's P/S Mean For Shareholders?

    Sunrun 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

    Keen to find out how analysts think Sunrun's future stacks up against the industry? In that case, our free report is a great place to start.

    What Are Revenue Growth Metrics Telling Us About The Low P/S?

    The only time you'd be truly comfortable seeing a P/S as low as Sunrun's is when the company's growth is on track to lag the industry.

    In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.8%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 27% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

    Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 11% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 15% per annum, which is noticeably more attractive.

    With this information, we can see why Sunrun is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

    The Key Takeaway

    Despite Sunrun's share price climbing recently, its P/S still lags most other companies. 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.

    We've established that Sunrun maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

    Plus, you should also learn about these 3 warning signs we've spotted with Sunrun (including 1 which is potentially serious).

    If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.