Stora Enso Oyj (HEL:STERV) Not Flying Under The Radar

It's not a stretch to say that Stora Enso Oyj's (HEL:STERV) price-to-sales (or "P/S") ratio of 0.9x right now seems quite "middle-of-the-road" for companies in the Forestry industry in Finland, where the median P/S ratio is around 0.7x. 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.

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Check out our latest analysis for Stora Enso Oyj

How Stora Enso Oyj Has Been Performing

With revenue growth that's superior to most other companies of late, Stora Enso Oyj has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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.

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

Stora Enso Oyj's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 5.5% gain to the company's revenues. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 19% 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.

Looking ahead now, revenue is anticipated to climb by 3.7% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 2.5% growth each year, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Stora Enso Oyj's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Stora Enso 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.

A Stora Enso Oyj's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Forestry industry. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Stora Enso Oyj 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.

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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.