Stabilis Solutions, Inc.'s (NASDAQ:SLNG) Shares Climb 26% But Its Business Is Yet to Catch Up

Despite an already strong run, Stabilis Solutions, Inc. (NASDAQ:SLNG) shares have been powering on, with a gain of 26% in the last thirty days. The last 30 days bring the annual gain to a very sharp 68%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Stabilis Solutions' P/S ratio of 1.7x, since the median price-to-sales (or "P/S") ratio for the Oil and Gas industry in the United States is also close to 1.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Stabilis Solutions

What Does Stabilis Solutions' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Stabilis Solutions over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Stabilis Solutions' earnings, revenue and cash flow.

How Is Stabilis Solutions' Revenue Growth Trending?

Stabilis Solutions' 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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 19% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 9.6% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Stabilis Solutions' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What We Can Learn From Stabilis Solutions' P/S?

Its shares have lifted substantially and now Stabilis Solutions' P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Stabilis Solutions' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Stabilis Solutions with six simple checks on some of these key factors.

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.