NCS Multistage Holdings, Inc.'s (NASDAQ:NCSM) P/S Is Still On The Mark Following 29% Share Price Bounce

NCS Multistage Holdings, Inc. (NASDAQ:NCSM) shares have continued their recent momentum with a 29% gain in the last month alone. The last month tops off a massive increase of 117% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that NCS Multistage Holdings' price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" compared to the Energy Services industry in the United States, where the median P/S ratio is around 0.8x. 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.

Check out our latest analysis for NCS Multistage Holdings

What Does NCS Multistage Holdings' P/S Mean For Shareholders?

NCS Multistage Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

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

NCS Multistage Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. The latest three year period has also seen an excellent 37% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 5.5% each year during the coming three years according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 4.7% per annum, which is not materially different.

With this information, we can see why NCS Multistage Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On NCS Multistage Holdings' P/S

Its shares have lifted substantially and now NCS Multistage Holdings' P/S is back within range of the industry median. 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.

A NCS Multistage Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Energy Services industry. 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. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

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

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.