Some Shareholders Feeling Restless Over SEACOR Marine Holdings Inc.'s (NYSE:SMHI) P/S Ratio

It's not a stretch to say that SEACOR Marine Holdings Inc.'s (NYSE:SMHI) price-to-sales (or "P/S") ratio of 0.7x right now seems quite "middle-of-the-road" for companies in the Energy Services industry in the United States, where the median P/S ratio is around 0.9x. 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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See our latest analysis for SEACOR Marine Holdings

How Has SEACOR Marine Holdings Performed Recently?

SEACOR Marine Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SEACOR Marine Holdings.

How Is SEACOR Marine Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, SEACOR Marine Holdings would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 9.8% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 33% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 3.4% during the coming year according to the lone analyst following the company. With the industry predicted to deliver 2.0% growth, that's a disappointing outcome.

With this information, we find it concerning that SEACOR Marine Holdings is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

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.

While SEACOR Marine Holdings' P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for SEACOR Marine Holdings (1 is a bit concerning) you should be aware of.

If these risks are making you reconsider your opinion on SEACOR Marine Holdings, 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.