Administer Oyj's (HEL:ADMIN) P/S Still Appears To Be Reasonable

With a median price-to-sales (or "P/S") ratio of close to 0.6x in the Professional Services industry in Finland, you could be forgiven for feeling indifferent about Administer Oyj's (HEL:ADMIN) P/S ratio of 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Administer Oyj

What Does Administer Oyj's P/S Mean For Shareholders?

Recent times have been advantageous for Administer Oyj as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Administer Oyj will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Administer Oyj would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. Pleasingly, revenue has also lifted 82% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 3.3% per annum over the next three years. With the industry predicted to deliver 5.0% growth per year, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Administer Oyj's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Administer Oyj's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at Administer Oyj's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Before you settle on your opinion, we've discovered 2 warning signs for Administer Oyj that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.