Improved Revenues Required Before Orion Group Holdings, Inc. (NYSE:ORN) Stock's 26% Jump Looks Justified

Orion Group Holdings, Inc. (NYSE:ORN) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last month tops off a massive increase of 106% in the last year.

In spite of the firm bounce in price, considering around half the companies operating in the United States' Construction industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider Orion Group Holdings as an solid investment opportunity with its 0.3x P/S ratio. 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 Orion Group Holdings

What Does Orion Group Holdings' Recent Performance Look Like?

Orion Group Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Orion Group Holdings' 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 Orion Group Holdings?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.1%. As a result, revenue from three years ago have also fallen 4.5% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 5.7% each year over the next three years. That's shaping up to be materially lower than the 9.2% per year growth forecast for the broader industry.

In light of this, it's understandable that Orion Group Holdings' 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 Orion Group Holdings' P/S

Despite Orion Group Holdings' share price climbing recently, its P/S still lags most other companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Orion Group Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Orion Group Holdings, and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on Orion Group Holdings, 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.