What You Can Learn From Oil States International, Inc.'s (NYSE:OIS) P/S

There wouldn't be many who think Oil States International, Inc.'s (NYSE:OIS) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Energy Services industry in the United States is similar at about 1.1x. 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.

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View our latest analysis for Oil States International

What Does Oil States International's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Oil States International's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Oil States International's to be considered reasonable.

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 11%. This means it has also seen a slide in revenue over the longer-term as revenue is down 6.0% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 4.5% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 2.7%, which is not materially different.

In light of this, it's understandable that Oil States International's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Oil States International's P/S

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.

A Oil States International's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Energy Services industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Oil States International, and understanding should be part of your investment process.

If you're unsure about the strength of Oil States International's 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.