Stock Analysis

Market Might Still Lack Some Conviction On Gulf Island Fabrication, Inc. (NASDAQ:GIFI) Even After 26% Share Price Boost

NasdaqGS:GIFI
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Gulf Island Fabrication, Inc. (NASDAQ:GIFI) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 79%.

Even after such a large jump in price, there still wouldn't be many who think Gulf Island Fabrication's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in the United States' Energy Services industry is similar at about 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Gulf Island Fabrication

ps-multiple-vs-industry
NasdaqGS:GIFI Price to Sales Ratio vs Industry November 12th 2024

How Has Gulf Island Fabrication Performed Recently?

Gulf Island Fabrication has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Gulf Island Fabrication will help you shine a light on its historical performance.

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

In order to justify its P/S ratio, Gulf Island Fabrication would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 15% last year. Pleasingly, revenue has also lifted 84% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is only predicted to deliver 6.3% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Gulf Island Fabrication's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Gulf Island Fabrication's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Gulf Island Fabrication currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you take the next step, you should know about the 1 warning sign for Gulf Island Fabrication that we have uncovered.

If you're unsure about the strength of Gulf Island Fabrication's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.