Subdued Growth No Barrier To IHS Holding Limited (NYSE:IHS) With Shares Advancing 36%

Despite an already strong run, IHS Holding Limited (NYSE:IHS) shares have been powering on, with a gain of 36% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

Even after such a large jump in price, there still wouldn't be many who think IHS Holding's price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in the United States' Telecom industry is similar at about 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for IHS Holding

What Does IHS Holding's P/S Mean For Shareholders?

IHS Holding could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. 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 IHS Holding.

Is There Some Revenue Growth Forecasted For IHS Holding?

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

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 8.3% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 4.7% per year as estimated by the seven analysts watching the company. That's shaping up to be materially lower than the 106% per year growth forecast for the broader industry.

With this in mind, we find it intriguing that IHS Holding'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.

The Bottom Line On IHS Holding's P/S

IHS Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Our look at the analysts forecasts of IHS Holding's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you settle on your opinion, we've discovered 1 warning sign for IHS Holding that you should be aware of.

If these risks are making you reconsider your opinion on IHS Holding, 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.