The Market Lifts HydrogenPro ASA (OB:HYPRO) Shares 25% But It Can Do More

Those holding HydrogenPro ASA (OB:HYPRO) shares would be relieved that the share price has rebounded 25% 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 66% share price decline over the last year.

Although its price has surged higher, 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 1.4x. 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

How Has HydrogenPro Performed Recently?

HydrogenPro hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. 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 HydrogenPro.

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.

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. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 327% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 10%, which is noticeably less attractive.

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.

The Final Word

HydrogenPro appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Looking at HydrogenPro's 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 3 warning signs for HydrogenPro you should be aware of, and 1 of them is a bit unpleasant.

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.