Investors Give CH Offshore Ltd. (SGX:C13) Shares A 43% Hiding

Unfortunately for some shareholders, the CH Offshore Ltd. (SGX:C13) share price has dived 43% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 65% share price decline.

Even after such a large drop in price, it's still not a stretch to say that CH Offshore's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Energy Services industry in Singapore, where the median P/S ratio is around 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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See our latest analysis for CH Offshore

How CH Offshore Has Been Performing

CH Offshore has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on CH Offshore will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for CH Offshore, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is CH Offshore's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 8.9%. Pleasingly, revenue has also lifted 69% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 9.6%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's curious that CH Offshore's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Following CH Offshore's share price tumble, its P/S is just clinging on to the industry median P/S. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We didn't quite envision CH Offshore's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you settle on your opinion, we've discovered 2 warning signs for CH Offshore that you should be aware of.

If these risks are making you reconsider your opinion on CH 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.