Hunting PLC's (LON:HTG) Shares Leap 26% Yet They're Still Not Telling The Full Story

Hunting PLC (LON:HTG) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Hunting's price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Energy Services industry in the United Kingdom, where the median P/S ratio is around 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Hunting

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

Hunting's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

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

How Is Hunting's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hunting's to be considered reasonable.

Retrospectively, the last year delivered a decent 8.9% gain to the company's revenues. Pleasingly, revenue has also lifted 92% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 15% over the next year. With the industry only predicted to deliver 8.8%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Hunting's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Hunting's P/S?

Hunting appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Hunting currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Hunting (1 doesn't sit too well with us!) that you need to be mindful of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.