Investors Continue Waiting On Sidelines For Stora Enso Oyj (HEL:STERV)

With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Forestry industry in Finland, you could be forgiven for feeling indifferent about Stora Enso Oyj's (HEL:STERV) P/S ratio of 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Stora Enso Oyj

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

With revenue that's retreating more than the industry's average of late, Stora Enso Oyj has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Stora Enso Oyj.

Is There Some Revenue Growth Forecasted For Stora Enso Oyj?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Stora Enso Oyj's 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 12%. This means it has also seen a slide in revenue over the longer-term as revenue is down 7.3% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 6.4% per annum over the next three years. With the industry only predicted to deliver 4.1% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that Stora Enso Oyj's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Stora Enso Oyj currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Stora Enso Oyj with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Stora Enso Oyj, 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.