What You Can Learn From Integrated Wind Solutions ASA's (OB:IWS) P/S

Integrated Wind Solutions ASA's (OB:IWS) price-to-sales (or "P/S") ratio of 3.3x may look like a poor investment opportunity when you consider close to half the companies in the Construction industry in Norway have P/S ratios below 0.8x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Integrated Wind Solutions

What Does Integrated Wind Solutions' P/S Mean For Shareholders?

Recent times have been advantageous for Integrated Wind Solutions as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Integrated Wind Solutions will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Integrated Wind Solutions?

Integrated Wind Solutions' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 75%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 43% per annum during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 5.9% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Integrated Wind Solutions' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Integrated Wind Solutions' 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.

Our look into Integrated Wind Solutions shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

You always need to take note of risks, for example - Integrated Wind Solutions has 1 warning sign we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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.