Unfortunately for some shareholders, the Strike Energy Limited (ASX:STX) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

Although its price has dipped substantially, it's still not a stretch to say that Strike Energy's price-to-sales (or "P/S") ratio of 5.2x right now seems quite "middle-of-the-road" compared to the Oil and Gas industry in Australia, where the median P/S ratio is around 6.1x. 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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View our latest analysis for Strike Energy

How Has Strike Energy Performed Recently?

Recent times have been pleasing for Strike Energy 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. Those who are bullish on Strike Energy will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Strike Energy.

Is There Some Revenue Growth Forecasted For Strike Energy?

The only time you'd be comfortable seeing a P/S like Strike Energy's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 38% per year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 946% per annum, which is noticeably more attractive.

In light of this, it's curious that Strike Energy's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Key Takeaway

Following Strike Energy's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

When you consider that Strike Energy's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

Before you settle on your opinion, we've discovered 1 warning sign for Strike Energy that you should be aware of.

If these risks are making you reconsider your opinion on Strike Energy, 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.