Benign Growth For HELLENiQ ENERGY Holdings S.A. (ATH:ELPE) Underpins Its Share Price

You may think that with a price-to-sales (or "P/S") ratio of 0.2x HELLENiQ ENERGY Holdings S.A. (ATH:ELPE) is a stock worth checking out, seeing as almost half of all the Oil and Gas companies in Greece have P/S ratios greater than 1x and even P/S higher than 3x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 4 warning signs investors should be aware of before investing in HELLENiQ ENERGY Holdings. Read for free now.

View our latest analysis for HELLENiQ ENERGY Holdings

What Does HELLENiQ ENERGY Holdings' Recent Performance Look Like?

Recent times have been more advantageous for HELLENiQ ENERGY Holdings as its revenue hasn't fallen as much as the rest of the industry. One possibility is that the P/S ratio is low because investors think this relatively better revenue performance might be about to deteriorate significantly. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. In saying that, existing shareholders probably aren't pessimistic about the share price if the company's revenue continues outplaying the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on HELLENiQ ENERGY Holdings.

How Is HELLENiQ ENERGY Holdings' Revenue Growth Trending?

HELLENiQ ENERGY Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. However, a few strong years before that means that it was still able to grow revenue by an impressive 38% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Shifting to the future, estimates from the five analysts covering the company suggest revenue growth is heading into negative territory, declining 0.3% each year over the next three years. Meanwhile, the broader industry is forecast to expand by 1.9% each year, which paints a poor picture.

With this information, we are not surprised that HELLENiQ ENERGY Holdings is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On HELLENiQ ENERGY Holdings' P/S

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.

As we suspected, our examination of HELLENiQ ENERGY Holdings' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 4 warning signs for HELLENiQ ENERGY Holdings you should know about.

If you're unsure about the strength of HELLENiQ ENERGY Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.