Cautious Investors Not Rewarding Great Lakes Dredge & Dock Corporation's (NASDAQ:GLDD) Performance Completely

There wouldn't be many who think Great Lakes Dredge & Dock Corporation's (NASDAQ:GLDD) price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S for the Construction industry in the United States is similar at about 1.1x. 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 Great Lakes Dredge & Dock

What Does Great Lakes Dredge & Dock's Recent Performance Look Like?

There hasn't been much to differentiate Great Lakes Dredge & Dock's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Great Lakes Dredge & Dock?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Great Lakes Dredge & Dock's to be considered reasonable.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. Still, lamentably revenue has fallen 4.0% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 11%, which is noticeably less attractive.

In light of this, it's curious that Great Lakes Dredge & Dock'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 Great Lakes Dredge & Dock's P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Great Lakes Dredge & Dock's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Great Lakes Dredge & Dock (at least 1 which shouldn't be ignored), and understanding these should be part of your investment process.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.