Helix Energy Solutions Group, Inc.'s (NYSE:HLX) Shares May Have Run Too Fast Too Soon

With a median price-to-sales (or "P/S") ratio of close to 1x in the Energy Services industry in the United States, you could be forgiven for feeling indifferent about Helix Energy Solutions Group, Inc.'s (NYSE:HLX) P/S ratio of 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Helix Energy Solutions Group

What Does Helix Energy Solutions Group's Recent Performance Look Like?

Helix Energy Solutions Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Helix Energy Solutions Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Helix Energy Solutions Group?

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

If we review the last year of revenue growth, the company posted a terrific increase of 24%. The latest three year period has also seen an excellent 105% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 2.6% per year over the next three years. That's shaping up to be materially lower than the 6.3% each year growth forecast for the broader industry.

In light of this, it's curious that Helix Energy Solutions Group's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

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.

When you consider that Helix Energy Solutions Group's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It is also worth noting that we have found 1 warning sign for Helix Energy Solutions Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Helix Energy Solutions Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.