Positive Sentiment Still Eludes HydrogenPro ASA (OB:HYPRO) Following 30% Share Price Slump

To the annoyance of some shareholders, HydrogenPro ASA (OB:HYPRO) shares are down a considerable 30% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 63% loss during that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about HydrogenPro's P/S ratio of 1.5x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Norway is also close to 1.3x. 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.

View our latest analysis for HydrogenPro

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

HydrogenPro could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think HydrogenPro's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Retrospectively, the last year delivered a frustrating 46% decrease to the company's top line. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to climb by 127% per year during the coming three years according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 14% per annum, which is noticeably less attractive.

In light of this, it's curious that HydrogenPro's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On HydrogenPro's P/S

Following HydrogenPro's share price tumble, its P/S is just clinging on to the industry median P/S. 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. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with HydrogenPro (at least 1 which shouldn't be ignored), and understanding them should be part of your investment process.

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.