When you see that almost half of the companies in the Oil and Gas industry in the United States have price-to-sales ratios (or "P/S") below 1.5x, Gulfport Energy Corporation (NYSE:GPOR) looks to be giving off some sell signals with its 3.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.
View our latest analysis for Gulfport Energy
How Has Gulfport Energy Performed Recently?
Gulfport Energy hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. 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 Gulfport Energy will help you uncover what's on the horizon.Is There Enough Revenue Growth Forecasted For Gulfport Energy?
In order to justify its P/S ratio, Gulfport Energy would need to produce impressive growth in excess of the industry.
Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 40% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Looking ahead now, revenue is anticipated to climb by 59% during the coming year according to the five analysts following the company. With the industry only predicted to deliver 11%, the company is positioned for a stronger revenue result.
With this information, we can see why Gulfport Energy is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
What Does Gulfport Energy's P/S Mean For Investors?
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.
As we suspected, our examination of Gulfport Energy's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Gulfport Energy , and understanding should be part of your investment process.
If you're unsure about the strength of Gulfport Energy'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.