A Piece Of The Puzzle Missing From Aker Carbon Capture ASA's (OB:ACC) 29% Share Price Climb

Those holding Aker Carbon Capture ASA (OB:ACC) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.2% over the last year.

Although its price has surged higher, there still wouldn't be many who think Aker Carbon Capture's price-to-sales (or "P/S") ratio of 5.6x is worth a mention when it essentially matches the median P/S in Norway's Commercial Services industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Aker Carbon Capture

What Does Aker Carbon Capture's P/S Mean For Shareholders?

Recent times have been advantageous for Aker Carbon Capture as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Aker Carbon Capture's future stacks up against the industry? In that case, our free report is a great place to start.

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

In order to justify its P/S ratio, Aker Carbon Capture would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 89% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 65% each year as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 10% each year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Aker Carbon Capture's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Aker Carbon Capture appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Looking at Aker Carbon Capture's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Aker Carbon Capture with six simple checks on some of these key factors.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.