The Market Lifts Hexagon Purus ASA (OB:HPUR) Shares 27% But It Can Do More

Those holding Hexagon Purus ASA (OB:HPUR) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 78% share price decline over the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Hexagon Purus' P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Norway is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for Hexagon Purus

How Has Hexagon Purus Performed Recently?

While the industry has experienced revenue growth lately, Hexagon Purus' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Hexagon Purus?

The only time you'd be comfortable seeing a P/S like Hexagon Purus' is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 87% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 36% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 13% per annum, which is noticeably less attractive.

With this in consideration, we find it intriguing that Hexagon Purus' 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 Does Hexagon Purus' P/S Mean For Investors?

Its shares have lifted substantially and now Hexagon Purus' P/S is back within range of the industry median. 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.

Looking at Hexagon Purus' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Having said that, be aware Hexagon Purus is showing 5 warning signs in our investment analysis, and 1 of those shouldn't be ignored.

If these risks are making you reconsider your opinion on Hexagon Purus, 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.