A Piece Of The Puzzle Missing From W&T Offshore, Inc.'s (NYSE:WTI) 28% Share Price Climb

W&T Offshore, Inc. (NYSE:WTI) shareholders have had their patience rewarded with a 28% share price jump in the last month. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, W&T Offshore's price-to-sales (or "P/S") ratio of 0.7x might still make it look like a buy right now compared to the Oil and Gas industry in the United States, where around half of the companies have P/S ratios above 1.6x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for W&T Offshore

What Does W&T Offshore's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, W&T Offshore's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on W&T Offshore.

How Is W&T Offshore's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as W&T Offshore's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. As a result, revenue from three years ago have also fallen 35% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the two analysts watching the company. With the industry only predicted to deliver 4.3% per year, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that W&T Offshore's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From W&T Offshore's P/S?

W&T Offshore's stock price has surged recently, but its but its P/S still remains modest. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

W&T Offshore's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You always need to take note of risks, for example - W&T Offshore has 2 warning signs we think you should be aware of.

If you're unsure about the strength of W&T Offshore'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.