Orion Group Holdings, Inc. (NYSE:ORN) Looks Just Right With A 26% Price Jump

Despite an already strong run, Orion Group Holdings, Inc. (NYSE:ORN) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 279% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, there still wouldn't be many who think Orion Group Holdings' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in the United States' Construction industry is similar at about 1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Orion Group Holdings

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

While the industry has experienced revenue growth lately, Orion Group Holdings' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Orion Group Holdings would need to produce growth that's similar to 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 2.6%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 12% each year over the next three years. That's shaping up to be similar to the 10% each year growth forecast for the broader industry.

With this in mind, it makes sense that Orion Group Holdings' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now Orion Group Holdings' P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look at Orion Group Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Orion Group Holdings that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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