Par Pacific Holdings, Inc. (NYSE:PARR) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 41% over that time.
Although its price has surged higher, Par Pacific Holdings may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Oil and Gas industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
See our latest analysis for Par Pacific Holdings
What Does Par Pacific Holdings' Recent Performance Look Like?
Par Pacific Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.
Keen to find out how analysts think Par Pacific Holdings' future stacks up against the industry? In that case, our free report is a great place to start.Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Par Pacific Holdings would need to produce sluggish growth that's trailing the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.3%. Still, the latest three year period has seen an excellent 50% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to slump, contracting by 19% during the coming year according to the five analysts following the company. That's not great when the rest of the industry is expected to grow by 8.5%.
In light of this, it's understandable that Par Pacific Holdings' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
What Does Par Pacific Holdings' P/S Mean For Investors?
Par Pacific Holdings' stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
It's clear to see that Par Pacific Holdings maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Par Pacific Holdings' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Par Pacific Holdings that you should be aware of.
If you're unsure about the strength of Par Pacific Holdings' 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.