NCS Multistage Holdings, Inc. (NASDAQ:NCSM) shareholders would be excited to see that the share price has had a great month, posting a 42% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 29% in the last twelve months.

Although its price has surged higher, given about half the companies operating in the United States' Energy Services industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider NCS Multistage Holdings as an attractive investment with its 0.3x 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 limited.

See our latest analysis for NCS Multistage Holdings

What Does NCS Multistage Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, NCS Multistage Holdings' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is NCS Multistage Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, NCS Multistage 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 2.7%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 12% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 5.1% per annum over the next three years. With the industry predicted to deliver 9.7% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why NCS Multistage Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On NCS Multistage Holdings' P/S

The latest share price surge wasn't enough to lift NCS Multistage Holdings' P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that NCS Multistage Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for NCS Multistage Holdings that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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