OceanPal Inc. (NASDAQ:OP) shares have had a horrible month, losing 25% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 81% share price decline.

Since its price has dipped substantially, given about half the companies operating in the United States' Shipping industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider OceanPal as an attractive investment with its 0.8x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does OceanPal's Recent Performance Look Like?

OceanPal has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. 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 out of favour.

How Is OceanPal's Revenue Growth Trending?

There's an inherent assumption that a company should underperform 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. This was backed up an excellent period prior to see revenue up by 101% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to shrink 3.4% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

In light of this, it's quite peculiar that OceanPal's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

The Final Word

OceanPal's recently weak share price has pulled its P/S back below other Shipping companies. 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.

Upon analysing the past data, we see it is unexpected that OceanPal is currently trading at a lower P/S than the rest of the industry given that its revenue growth in the past three-year years is exceeding expectations in a challenging industry. We think potential risks might be placing significant pressure on the P/S ratio and share price. Amidst challenging industry conditions, perhaps a key concern is whether the company can sustain its superior revenue growth trajectory. While the chance of the share price dropping sharply is fairly remote, investors do seem to be anticipating future revenue instability.

Before you settle on your opinion, we've discovered 3 warning signs for OceanPal (2 shouldn't be ignored!) that you should be aware 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.

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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.