Take Care Before Jumping Onto Vow ASA (OB:VOW) Even Though It's 28% Cheaper

Unfortunately for some shareholders, the Vow ASA (OB:VOW) share price has dived 28% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 84% loss during that time.

Following the heavy fall in price, Vow may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Commercial Services industry in Norway have P/S ratios greater than 6.8x and even P/S higher than 186x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Vow

How Vow Has Been Performing

With revenue growth that's inferior to most other companies of late, Vow has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of 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.

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

Is There Any Revenue Growth Forecasted For Vow?

Vow's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. This was backed up an excellent period prior to see revenue up by 131% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 18% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

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

The Bottom Line On Vow's P/S

Having almost fallen off a cliff, Vow's share price has pulled its P/S way down as well. 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.

A look at Vow's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Vow (at least 2 which shouldn't be ignored), and understanding them should be part of your investment process.

If you're unsure about the strength of Vow's 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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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.