Motor Oil (Hellas) Corinth Refineries S.A.'s (ATH:MOH) Shares Lagging The Industry But So Is The Business

You may think that with a price-to-sales (or "P/S") ratio of 0.2x Motor Oil (Hellas) Corinth Refineries S.A. (ATH:MOH) 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 1.3x and even P/S higher than 4x 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 Motor Oil (Hellas) Corinth Refineries

How Has Motor Oil (Hellas) Corinth Refineries Performed Recently?

Motor Oil (Hellas) Corinth Refineries has been struggling lately as its revenue has declined faster than most other companies. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

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Is There Any Revenue Growth Forecasted For Motor Oil (Hellas) Corinth Refineries?

The only time you'd be truly comfortable seeing a P/S as low as Motor Oil (Hellas) Corinth Refineries' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. As a result, revenue from three years ago have also fallen 20% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue growth is heading into negative territory, declining 1.7% per year over the next three years. Meanwhile, the broader industry is forecast to expand by 3.1% each year, which paints a poor picture.

With this in consideration, we find it intriguing that Motor Oil (Hellas) Corinth Refineries' P/S is closely matching its industry peers. 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.

What Does Motor Oil (Hellas) Corinth Refineries' 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.

It's clear to see that Motor Oil (Hellas) Corinth Refineries maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Motor Oil (Hellas) Corinth Refineries' poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Motor Oil (Hellas) Corinth Refineries is showing 4 warning signs in our investment analysis, and 2 of those are concerning.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.