Netum Group Oyj's (HEL:NETUM) Shares Not Telling The Full Story

It's not a stretch to say that Netum Group Oyj's (HEL:NETUM) price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" for companies in the IT industry in Finland, where the median P/S ratio is around 1.2x. 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 Netum Group Oyj

What Does Netum Group Oyj's Recent Performance Look Like?

Netum Group Oyj certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Some Revenue Growth Forecasted For Netum Group Oyj?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Netum Group Oyj's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 30% gain to the company's top line. Pleasingly, revenue has also lifted 118% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 14% each year over the next three years. That's shaping up to be materially higher than the 4.3% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Netum Group Oyj's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Netum Group Oyj's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Netum Group Oyj currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

There are also other vital risk factors to consider before investing and we've discovered 5 warning signs for Netum Group Oyj that you should be aware of.

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

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.