What Mammoth Energy Services, Inc.'s (NASDAQ:TUSK) 29% Share Price Gain Is Not Telling You

Those holding Mammoth Energy Services, Inc. (NASDAQ:TUSK) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 16% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Mammoth Energy Services' price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in the United States' Energy Services industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 1 warning sign about Mammoth Energy Services. View them for free.

View our latest analysis for Mammoth Energy Services

What Does Mammoth Energy Services' Recent Performance Look Like?

For instance, Mammoth Energy Services' receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Mammoth Energy Services' earnings, revenue and cash flow.

How Is Mammoth Energy Services' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Mammoth Energy Services' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 39% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 18% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 2.9% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we find it concerning that Mammoth Energy Services is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Bottom Line On Mammoth Energy Services' P/S

Mammoth Energy Services appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We find it unexpected that Mammoth Energy Services trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Mammoth Energy Services that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.