O-I Glass, Inc. (NYSE:OI) shares have had a really impressive month, gaining 26% 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 36% over that time.

In spite of the firm bounce in price, considering around half the companies operating in the United States' Packaging industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider O-I Glass as an solid investment opportunity with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How O-I Glass Has Been Performing

The recently shrinking revenue for O-I Glass has been in line with the industry. One possibility is that the P/S ratio is low because investors think the company's revenue may begin to slide even faster. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. In saying that, existing shareholders may feel hopeful about the share price if the company's revenue continues tracking the industry.

Keen to find out how analysts think O-I Glass' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like O-I Glass' 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 5.7%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 6.9% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 2.4% each year over the next three years. With the industry predicted to deliver 3.6% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that O-I Glass 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.

What We Can Learn From O-I Glass' P/S?

The latest share price surge wasn't enough to lift O-I Glass' P/S close to the industry median. 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 looks to us like the P/S figures for O-I Glass remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you take the next step, you should know about the 1 warning sign for O-I Glass that we have uncovered.

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).

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.

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