Little Excitement Around HF Sinclair Corporation's (NYSE:DINO) Revenues

With a price-to-sales (or "P/S") ratio of 0.3x HF Sinclair Corporation (NYSE:DINO) may be sending bullish signals at the moment, given that almost half of all the Oil and Gas companies in the United States have P/S ratios greater than 1.8x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for HF Sinclair

What Does HF Sinclair's P/S Mean For Shareholders?

HF Sinclair has been struggling lately as its revenue has declined faster than most other companies. It seems that many are expecting the dismal revenue performance to persist, which has repressed the P/S. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

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

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

HF Sinclair's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. Even so, admirably revenue has lifted 90% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the eleven analysts covering the company suggest revenue growth is heading into negative territory, declining 1.7% per annum over the next three years. Meanwhile, the broader industry is forecast to expand by 41% per annum, which paints a poor picture.

With this information, we are not surprised that HF Sinclair is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From HF Sinclair's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's clear to see that HF Sinclair maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, HF Sinclair's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Plus, you should also learn about these 3 warning signs we've spotted with HF Sinclair.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.