Revenues Not Telling The Story For AutoStore Holdings Ltd. (OB:AUTO) After Shares Rise 30%

AutoStore Holdings Ltd. (OB:AUTO) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 50% share price decline over the last year.

Since its price has surged higher, when almost half of the companies in Norway's Machinery industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider AutoStore Holdings as a stock not worth researching with its 4.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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View our latest analysis for AutoStore Holdings

What Does AutoStore Holdings' Recent Performance Look Like?

AutoStore Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For AutoStore Holdings?

In order to justify its P/S ratio, AutoStore Holdings would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. Even so, admirably revenue has lifted 43% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 5.7% per annum during the coming three years according to the twelve analysts following the company. That's shaping up to be materially lower than the 13% per annum growth forecast for the broader industry.

In light of this, it's alarming that AutoStore Holdings' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On AutoStore Holdings' P/S

AutoStore Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

It comes as a surprise to see AutoStore Holdings trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

Plus, you should also learn about this 1 warning sign we've spotted with AutoStore Holdings.

If you're unsure about the strength of AutoStore Holdings' 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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