After Leaping 27% TETRA Technologies, Inc. (NYSE:TTI) Shares Are Not Flying Under The Radar

Despite an already strong run, TETRA Technologies, Inc. (NYSE:TTI) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 115% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, when almost half of the companies in the United States' Energy Services industry have price-to-sales ratios (or "P/S") below 1x, you may consider TETRA Technologies as a stock probably not worth researching with its 1.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for TETRA Technologies

How Has TETRA Technologies Performed Recently?

Recent times haven't been great for TETRA Technologies as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as TETRA Technologies' is when the company's growth is on track to outshine the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 19% in total over the last three years. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 4.6% over the next year. That's shaping up to be materially higher than the 2.3% growth forecast for the broader industry.

In light of this, it's understandable that TETRA Technologies' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

TETRA Technologies' P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that TETRA Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Energy Services industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for TETRA Technologies that you should be aware of.

If these risks are making you reconsider your opinion on TETRA Technologies, 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.