Market Might Still Lack Some Conviction On Stabilis Solutions, Inc. (NASDAQ:SLNG) Even After 39% Share Price Boost

Those holding Stabilis Solutions, Inc. (NASDAQ:SLNG) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Notwithstanding the latest gain, the annual share price return of 7.8% isn't as impressive.

Although its price has surged higher, there still wouldn't be many who think Stabilis Solutions' price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S in the United States' Oil and Gas industry is similar at about 1.5x. 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.

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See our latest analysis for Stabilis Solutions

What Does Stabilis Solutions' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Stabilis Solutions' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

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

The only time you'd be comfortable seeing a P/S like Stabilis Solutions' is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 3.0%. The last three years don't look nice either as the company has shrunk revenue by 15% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 13% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.7%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Stabilis Solutions' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Stabilis Solutions' P/S

Its shares have lifted substantially and now Stabilis Solutions' 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.

We've established that Stabilis Solutions currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 4 warning signs for Stabilis Solutions you should be aware of, and 1 of them can't be ignored.

If you're unsure about the strength of Stabilis Solutions' 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.