Greenfire Resources Ltd. (NYSE:GFR) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 40% over that time.

In spite of the firm bounce in price, Greenfire Resources may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Oil and Gas industry in the United States have P/S ratios greater than 1.9x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Greenfire Resources' Recent Performance Look Like?

For instance, Greenfire Resources' receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Greenfire Resources will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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

How Is Greenfire Resources' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Greenfire Resources' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 31%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 5.0% shows it's noticeably less attractive.

In light of this, it's understandable that Greenfire Resources' P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Greenfire Resources' P/S Mean For Investors?

Despite Greenfire Resources' share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Greenfire Resources confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Greenfire Resources you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.