Market Cool On Arrow Exploration Corp.'s (CVE:AXL) Revenues Pushing Shares 27% Lower

The Arrow Exploration Corp. (CVE:AXL) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 16% in that time.

In spite of the heavy fall in price, Arrow Exploration may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Oil and Gas industry in Canada have P/S ratios greater than 2x and even P/S higher than 6x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Arrow Exploration

What Does Arrow Exploration's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Arrow Exploration has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Arrow Exploration's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 60%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 2.4% per annum as estimated by the sole analyst watching the company. With the industry predicted to deliver 1.5% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that Arrow Exploration is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Arrow Exploration's P/S?

The southerly movements of Arrow Exploration's shares means its P/S is now sitting at a pretty low level. 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 examination of Arrow Exploration's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Plus, you should also learn about these 2 warning signs we've spotted with Arrow Exploration.

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.

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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.