Worley Limited (ASX:WOR) Not Flying Under The Radar

It's not a stretch to say that Worley Limited's (ASX:WOR) price-to-sales (or "P/S") ratio of 0.6x seems quite "middle-of-the-road" for Construction companies in Australia, seeing as it matches the P/S ratio of the wider industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Worley

How Has Worley Performed Recently?

Worley could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Worley would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 4.2% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 24% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 7.4% per year as estimated by the eleven analysts watching the company. With the industry predicted to deliver 8.3% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Worley's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Worley's P/S Mean For Investors?

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 Worley's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Construction industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You always need to take note of risks, for example - Worley has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Worley, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.