There wouldn't be many who think NACCO Industries, Inc.'s (NYSE:NC) price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S for the Oil and Gas industry in the United States is similar at about 1.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for NACCO Industries

How Has NACCO Industries Performed Recently?

Revenue has risen firmly for NACCO Industries recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S 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.

Although there are no analyst estimates available for NACCO Industries, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For NACCO Industries?

In order to justify its P/S ratio, NACCO Industries would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. The latest three year period has also seen a 24% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 8.4% shows it's about the same on an annualised basis.

With this information, we can see why NACCO Industries is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It appears to us that NACCO Industries maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You need to take note of risks, for example - NACCO Industries has 4 warning signs (and 1 which can't be ignored) we think you should know about.

If these risks are making you reconsider your opinion on NACCO Industries, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.