Market Participants Recognise Outdoor Holding Company's (NASDAQ:POWW) Revenues Pushing Shares 26% Higher

Those holding Outdoor Holding Company (NASDAQ:POWW) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, despite the strong performance over the last month, the full year gain of 5.1% isn't as attractive.

After such a large jump in price, you could be forgiven for thinking Outdoor Holding is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.7x, considering almost half the companies in the United States' Leisure industry have P/S ratios below 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for Outdoor Holding

How Has Outdoor Holding Performed Recently?

Outdoor Holding certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Outdoor Holding will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Outdoor Holding?

The only time you'd be truly comfortable seeing a P/S as steep as Outdoor Holding's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 76% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 81% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 7.2% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 2.5% growth forecast for the broader industry.

With this information, we can see why Outdoor Holding is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Outdoor Holding's P/S Mean For Investors?

Shares in Outdoor Holding have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Outdoor Holding maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Leisure industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Outdoor Holding that you should be aware of.

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.