There's No Escaping Orion Group Holdings, Inc.'s (NYSE:ORN) Muted Revenues Despite A 36% Share Price Rise

Despite an already strong run, Orion Group Holdings, Inc. (NYSE:ORN) shares have been powering on, with a gain of 36% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 85% in the last year.

Although its price has surged higher, given about half the companies operating in the United States' Construction industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider Orion Group Holdings as an attractive investment with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Orion Group Holdings

How Orion Group Holdings Has Been Performing

Orion Group Holdings could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Orion Group Holdings.

Is There Any Revenue Growth Forecasted For Orion Group Holdings?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Orion Group Holdings' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.0% last year. The solid recent performance means it was also able to grow revenue by 17% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 3.4% as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 12% 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. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

Despite Orion Group Holdings' share price climbing recently, its P/S still lags most other companies. 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.

We've established that Orion Group Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Orion Group Holdings you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.