Antero Resources Corporation's (NYSE:AR) Shares Leap 27% Yet They're Still Not Telling The Full Story

The Antero Resources Corporation (NYSE:AR) share price has done very well over the last month, posting an excellent gain of 27%. Unfortunately, despite the strong performance over the last month, the full year gain of 6.9% isn't as attractive.

Even after such a large jump in price, it's still not a stretch to say that Antero Resources' price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" compared to the Oil and Gas industry in the United States, seeing as it matches the P/S ratio of the wider industry. 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.

View our latest analysis for Antero Resources

What Does Antero Resources' P/S Mean For Shareholders?

Recent times haven't been great for Antero Resources as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. You'd much rather the company improve its revenue if you still believe in the business. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Antero Resources will help you uncover what's on the horizon.

How Is Antero Resources' Revenue Growth Trending?

Antero Resources' 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 49%. Still, the latest three year period has seen an excellent 32% 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 three years should generate growth of 8.2% each year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 3.4% per year, which is noticeably less attractive.

With this information, we find it interesting that Antero Resources is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Antero Resources' P/S Mean For Investors?

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

Despite enticing revenue growth figures that outpace the industry, Antero Resources' P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Antero Resources that you need to be mindful of.

If you're unsure about the strength of Antero Resources' 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.