Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) Stock Rockets 27% But Many Are Still Ignoring The Company

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Even after such a large jump in price, it's still not a stretch to say that Great Lakes Dredge & Dock's price-to-sales (or "P/S") ratio of 1x right now seems quite "middle-of-the-road" compared to the Construction industry in the United States, seeing as it matches the P/S ratio of the wider industry. 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.

See our latest analysis for Great Lakes Dredge & Dock

How Has Great Lakes Dredge & Dock Performed Recently?

Recent times haven't been great for Great Lakes Dredge & Dock as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Great Lakes Dredge & Dock.

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.

Taking a look back first, we see that the company managed to grow revenues by a handy 2.9% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 9.1% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 22% over the next year. That's shaping up to be materially higher than the 9.6% growth forecast for the broader industry.

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

Great Lakes Dredge & Dock appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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. 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.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Great Lakes Dredge & Dock that you need to be mindful of.

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.