Some Confidence Is Lacking In Helmerich & Payne, Inc.'s (NYSE:HP) P/S

With a median price-to-sales (or "P/S") ratio of close to 0.9x in the Energy Services industry in the United States, you could be forgiven for feeling indifferent about Helmerich & Payne, Inc.'s (NYSE:HP) P/S ratio of 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.

Check out our latest analysis for Helmerich & Payne

What Does Helmerich & Payne's Recent Performance Look Like?

Helmerich & Payne certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Helmerich & Payne.

How Is Helmerich & Payne's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Helmerich & Payne's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. Pleasingly, revenue has also lifted 62% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 0.5% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 9.4% per annum, which is noticeably more attractive.

With this in mind, we find it intriguing that Helmerich & Payne's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Helmerich & Payne's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Given that Helmerich & Payne's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Helmerich & Payne with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Helmerich & Payne, 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.