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Even With A 27% Surge, Cautious Investors Are Not Rewarding FreightCar America, Inc.'s (NASDAQ:RAIL) Performance Completely

Simply Wall St · 2d ago

FreightCar America, Inc. (NASDAQ:RAIL) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 7.0% isn't as impressive.

Even after such a large jump in price, it would still be understandable if you think FreightCar America is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in the United States' Machinery industry have P/S ratios above 2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for FreightCar America

ps-multiple-vs-industry
NasdaqGS:RAIL Price to Sales Ratio vs Industry December 18th 2025

How FreightCar America Has Been Performing

FreightCar America 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. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on FreightCar America will help you uncover what's on the horizon.

How Is FreightCar America's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 6.4% decrease to the company's top line. Still, the latest three year period has seen an excellent 65% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 6.3% per year, which is noticeably less attractive.

With this information, we find it odd that FreightCar America is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does FreightCar America's P/S Mean For Investors?

The latest share price surge wasn't enough to lift FreightCar America's P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at FreightCar America's 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. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 3 warning signs we've spotted with FreightCar America.

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.