Market Might Still Lack Some Conviction On Otovo ASA (OB:OTOVO) Even After 26% Share Price Boost

Those holding Otovo ASA (OB:OTOVO) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 77% share price decline over the last year.

Even after such a large jump in price, given about half the companies operating in Norway's Electrical industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Otovo as an attractive investment with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Otovo

What Does Otovo's Recent Performance Look Like?

Otovo could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Otovo?

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

Retrospectively, the last year delivered a frustrating 23% decrease to the company's top line. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Turning to the outlook, the next year should generate growth of 7.4% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.8%, which is not materially different.

With this in consideration, we find it intriguing that Otovo's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Otovo's P/S?

Despite Otovo's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Otovo currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Before you settle on your opinion, we've discovered 5 warning signs for Otovo (3 don't sit too well with us!) that 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.

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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.