Investors Still Aren't Entirely Convinced By Petro-king Oilfield Services Limited's (HKG:2178) Revenues Despite 78% Price Jump

The Petro-king Oilfield Services Limited (HKG:2178) share price has done very well over the last month, posting an excellent gain of 78%. Unfortunately, despite the strong performance over the last month, the full year gain of 5.3% isn't as attractive.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Petro-king Oilfield Services' P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Energy Services industry in Hong Kong is also close to 0.4x. 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.

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Check out our latest analysis for Petro-king Oilfield Services

What Does Petro-king Oilfield Services' Recent Performance Look Like?

For instance, Petro-king Oilfield 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.

How Is Petro-king Oilfield Services' Revenue Growth Trending?

In order to justify its P/S ratio, Petro-king Oilfield Services would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.6%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 80% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 9.5% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Petro-king Oilfield Services' P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Petro-king Oilfield Services' P/S

Petro-king Oilfield Services' 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.

We didn't quite envision Petro-king Oilfield Services' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It is also worth noting that we have found 2 warning signs for Petro-king Oilfield Services (1 is significant!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.