Market Participants Recognise SSH Communications Security Oyj's (HEL:SSH1V) Revenues

When you see that almost half of the companies in the Software industry in Finland have price-to-sales ratios (or "P/S") below 1.8x, SSH Communications Security Oyj (HEL:SSH1V) looks to be giving off some sell signals with its 2.8x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for SSH Communications Security Oyj

How SSH Communications Security Oyj Has Been Performing

SSH Communications Security Oyj could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

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

In order to justify its P/S ratio, SSH Communications Security Oyj would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. The latest three year period has also seen an excellent 49% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 20% each year during the coming three years according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 17% each year, which is noticeably less attractive.

In light of this, it's understandable that SSH Communications Security Oyj's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On SSH Communications Security Oyj's 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.

We've established that SSH Communications Security Oyj maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Having said that, be aware SSH Communications Security Oyj is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of SSH Communications Security Oyj's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.