Market Might Still Lack Some Conviction On OceanPal Inc. (NASDAQ:OP) Even After 46% Share Price Boost

OceanPal Inc. (NASDAQ:OP) shareholders would be excited to see that the share price has had a great month, posting a 46% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 61% share price drop in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think OceanPal's price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S in the United States' Shipping industry is similar at about 1.2x. 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.

Check out our latest analysis for OceanPal

How OceanPal Has Been Performing

Revenue has risen at a steady rate over the last year for OceanPal, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for OceanPal, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 6.5% last year. Pleasingly, revenue has also lifted 101% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 1.6% shows it's a great look while it lasts.

With this in mind, we find it intriguing that OceanPal's P/S matches its industry peers. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On OceanPal's P/S

OceanPal appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As mentioned previously, OceanPal currently trades on a P/S on par with the wider industry, but this is lower than expected considering its recent three-year revenue growth is beating forecasts for a struggling industry. There could be some unobserved threats to revenue preventing the P/S ratio from outpacing the industry much like its revenue performance. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. It appears some are indeed anticipating revenue instability, because this relative performance should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for OceanPal (2 don't sit too well with us) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.