Investors Interested In FOM Technologies A/S' (CPH:FOM) Revenues

FOM Technologies A/S' (CPH:FOM) price-to-sales (or "P/S") ratio of 2.1x may not look like an appealing investment opportunity when you consider close to half the companies in the Machinery industry in Denmark have P/S ratios below 1x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for FOM Technologies

How FOM Technologies Has Been Performing

With revenue growth that's exceedingly strong of late, FOM Technologies has been doing very well. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For FOM Technologies?

FOM Technologies' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 45% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.4% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why FOM Technologies' P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From FOM Technologies' P/S?

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.

As we suspected, our examination of FOM Technologies revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with FOM Technologies (at least 1 which can't be ignored), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on FOM Technologies, 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.