It's Down 26% But HydrogenPro ASA (OB:HYPRO) Could Be Riskier Than It Looks

To the annoyance of some shareholders, HydrogenPro ASA (OB:HYPRO) shares are down a considerable 26% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 62% share price decline.

In spite of the heavy fall in price, it's still not a stretch to say that HydrogenPro's price-to-sales (or "P/S") ratio of 1.9x right now seems quite "middle-of-the-road" compared to the Machinery industry in Norway, where the median P/S ratio is around 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for HydrogenPro

What Does HydrogenPro's Recent Performance Look Like?

HydrogenPro certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is HydrogenPro's Revenue Growth Trending?

In order to justify its P/S ratio, HydrogenPro would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 102% per annum during the coming three years according to the dual analysts following the company. With the industry only predicted to deliver 52% each year, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that HydrogenPro's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

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

With its share price dropping off a cliff, the P/S for HydrogenPro looks to be in line with the rest of the Machinery industry. 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.

We've established that HydrogenPro 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 6 warning signs we've spotted with HydrogenPro (including 2 which are potentially serious).

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