Sentiment Still Eluding Nordic Unmanned ASA (OB:NUMND)

Nordic Unmanned ASA's (OB:NUMND) price-to-sales (or "P/S") ratio of 0.4x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Aerospace & Defense industry in Norway have P/S ratios greater than 1.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Nordic Unmanned

What Does Nordic Unmanned's Recent Performance Look Like?

The revenue growth achieved at Nordic Unmanned over the last year would be more than acceptable for most companies. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. 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 out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Nordic Unmanned's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Nordic Unmanned?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Nordic Unmanned's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The strong recent performance means it was also able to grow revenue by 192% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 10% shows it's noticeably more attractive.

With this information, we find it odd that Nordic Unmanned is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Nordic Unmanned revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Nordic Unmanned (3 don't sit too well with us!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.