Investors Still Aren't Entirely Convinced By IHS Holding Limited's (NYSE:IHS) Revenues Despite 28% Price Jump
IHS Holding Limited (NYSE:IHS) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.
Even after such a large jump in price, there still wouldn't be many who think IHS Holding's price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in the United States' Telecom industry is similar at about 1.2x. 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.
Check out our latest analysis for IHS Holding
How Has IHS Holding Performed Recently?
Recent times have been pleasing for IHS Holding as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. 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 not quite in favour.
Keen to find out how analysts think IHS Holding's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For IHS Holding?
There's an inherent assumption that a company should be matching the industry for P/S ratios like IHS Holding's to be considered reasonable.
If we review the last year of revenue growth, the company posted a terrific increase of 24%. The strong recent performance means it was also able to grow revenue by 59% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.
Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 9.4% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 4.1% per annum, which is noticeably less attractive.
In light of this, it's curious that IHS Holding's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.
The Bottom Line On IHS Holding's P/S
IHS Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Despite enticing revenue growth figures that outpace the industry, IHS Holding's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.
Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for IHS Holding with six simple checks.
If you're unsure about the strength of IHS Holding's 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.
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