There's No Escaping KLX Energy Services Holdings, Inc.'s (NASDAQ:KLXE) Muted Revenues Despite A 26% Share Price Rise

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 43% over that time.

In spite of the firm bounce in price, when close to half the companies operating in the United States' Energy Services industry have price-to-sales ratios (or "P/S") above 1x, you may still consider KLX Energy Services Holdings as an enticing stock to check out with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for KLX Energy Services Holdings

How KLX Energy Services Holdings Has Been Performing

While the industry has experienced revenue growth lately, KLX Energy Services Holdings' revenue has gone into reverse gear, which is not great. 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.

Want the full picture on analyst estimates for the company? Then our free report on KLX Energy Services Holdings will help you uncover what's on the horizon.

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

In order to justify its P/S ratio, KLX Energy Services Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 20% decrease to the company's top line. Still, the latest three year period has seen an excellent 72% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next year should generate growth of 0.03% as estimated by the only analyst watching the company. With the industry predicted to deliver 5.8% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that KLX Energy Services Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

KLX Energy Services 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.

We've established that KLX Energy Services Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 4 warning signs for KLX Energy Services Holdings that you should be aware 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.