Solstad Offshore ASA's (OB:SOFF) 26% Dip In Price Shows Sentiment Is Matching Revenues

Unfortunately for some shareholders, the Solstad Offshore ASA (OB:SOFF) share price has dived 26% in the last thirty days, prolonging recent pain. Still, a bad month hasn't completely ruined the past year with the stock gaining 53%, which is great even in a bull market.

Following the heavy fall in price, Solstad Offshore may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Energy Services industry in Norway have P/S ratios greater than 1.6x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Solstad Offshore

What Does Solstad Offshore's Recent Performance Look Like?

Solstad Offshore could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Solstad Offshore?

In order to justify its P/S ratio, Solstad Offshore would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 23% gain to the company's top line. The latest three year period has also seen a 25% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 1.6% per annum over the next three years. With the industry predicted to deliver 16% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Solstad Offshore's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Solstad Offshore's P/S

Solstad Offshore's P/S has taken a dip along with its share price. 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.

As expected, our analysis of Solstad Offshore's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about this 1 warning sign we've spotted with Solstad Offshore.

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