There's No Escaping Swift Networks Group Limited's (ASX:SW1) Muted Revenues

Swift Networks Group Limited's (ASX:SW1) price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Entertainment industry in Australia, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Swift Networks Group

What Does Swift Networks Group's Recent Performance Look Like?

Swift Networks Group has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Swift Networks Group?

In order to justify its P/S ratio, Swift Networks Group would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 2.9%. The latest three year period has also seen a 5.3% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Swift Networks Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Swift Networks Group revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Swift Networks Group (of which 2 don't sit too well with us!) you should know about.

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

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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.