Orion Group Holdings, Inc. (NYSE:ORN) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last month tops off a massive increase of 106% in the last year.

Although its price has surged higher, given about half the companies operating in the United States' Construction industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider Orion Group Holdings as an attractive investment with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Orion Group Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Orion Group Holdings' revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Orion Group Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Orion Group 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 1.1%. As a result, revenue from three years ago have also fallen 4.5% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 5.7% per year during the coming three years according to the four analysts following the company. That's shaping up to be materially lower than the 9.2% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Orion Group 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 Orion Group Holdings' P/S

Orion Group Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Orion Group Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Orion Group Holdings, and understanding these should be part of your investment process.

If you're unsure about the strength of Orion Group Holdings' 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.