Why Redwire Stock Just Crashed

Redwire (NYSE: RDW) stock, a specialist in building infrastructure in space, just won a NASA contract of unspecified value, to "facilitate a Space Microalgae biotechnology experiment" that will be carried to the International Space Station aboard the upcoming Axiom Mission 4.

Redwire stock is not up on the news, however, but rather down a staggering 9.8% through 2:20 p.m. ET. But here's the thing: Redwire's sell-off is not because of the new NASA contract; it's in spite of it.

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Redwire + green algae = a 10% loss?

"The Space Microalgae investigation will analyze the impact of microgravity on the growth, metabolism, and genetic activity of three strains of edible microalgae," explains Redwire, "which researchers are assessing as a potential sustainable food source for long-duration space missions." So far, so good.

Even not knowing how much Redwire will make off the contract, this development could facilitate future missions to the moon, to Mars, and beyond -- great news for anyone involved in space investing.

Is Redwire stock a sell?

The problem isn't with the NASA contract, but with Redwire stock itself.

Over the past year, Redwire stock more than tripled in price. Valued at $1.5 billion today, the company has no profits, and less than $280 million in revenue, meaning the stock carries a price-to-sales ratio of more than 5.3. That's versus my estimate profitless space stocks should sell for no more than 2 to 4 times trailing sales -- and versus the mere 1.4 times sales that Redwire stock cost just one year ago.

Back in June 2024, I highlighted Redwire's low cost as a key indicator it was time to buy the stock. Redwire's a three-bagger now (so yes, I was right about that). At 5.3 times sales, however, Redwire stock's become a lot more expensive. It's probably time to sell.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.