Investors Still Aren't Entirely Convinced By Orion Group Holdings, Inc.'s (NYSE:ORN) Revenues Despite 43% Price Jump

Orion Group Holdings, Inc. (NYSE:ORN) shares have continued their recent momentum with a 43% gain in the last month alone. The last month tops off a massive increase of 258% in the last year.

Although its price has surged higher, 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 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Orion Group Holdings

What Does Orion Group Holdings' P/S Mean For Shareholders?

Orion Group Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Orion Group Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.9%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 7.4% per year as estimated by the four analysts watching the company. With the industry predicted to deliver 7.9% growth each year, the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Orion Group Holdings' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Orion Group Holdings' P/S?

Orion Group Holdings' stock price has surged recently, but its but its P/S still remains modest. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Orion Group Holdings' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Orion Group Holdings with six simple checks.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.