Revenues Not Telling The Story For Mammoth Energy Services, Inc. (NASDAQ:TUSK) After Shares Rise 26%

Mammoth Energy Services, Inc. (NASDAQ:TUSK) shareholders have had their patience rewarded with a 26% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Mammoth Energy Services' price-to-sales (or "P/S") ratio of 0.8x 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 1.2x. 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.

See our latest analysis for Mammoth Energy Services

How Has Mammoth Energy Services Performed Recently?

For instance, Mammoth Energy Services' receding revenue in recent times would have to be some food for thought. 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 not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Mammoth Energy Services, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Mammoth Energy Services' Revenue Growth Trending?

In order to justify its P/S ratio, Mammoth Energy Services would need to produce growth that's similar to the industry.

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 43%. As a result, revenue from three years ago have also fallen 16% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 9.8% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we find it concerning that Mammoth Energy Services is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

The Key Takeaway

Its shares have lifted substantially and now Mammoth Energy Services' 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.

The fact that Mammoth Energy Services currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Mammoth Energy Services that you should be aware of.

If you're unsure about the strength of Mammoth Energy Services' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com