Despite an already strong run, Nabors Industries Ltd. (NYSE:NBR) shares have been powering on, with a gain of 27% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, it would still be understandable if you think Nabors Industries is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in the United States' Energy Services industry have P/S ratios above 1.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Has Nabors Industries Performed Recently?

Nabors Industries certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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How Is Nabors Industries' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Nabors Industries' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.5%. The solid recent performance means it was also able to grow revenue by 28% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 2.5% each year during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 4.2% each year, which is not materially different.

With this information, we find it odd that Nabors Industries is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Nabors Industries' stock price has surged recently, but its but its P/S still remains modest. 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.

It looks to us like the P/S figures for Nabors Industries remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

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.