Unpleasant Surprises Could Be In Store For Havila Kystruten AS' (OB:HKY) Shares

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Hospitality industry in Norway, you could be forgiven for feeling indifferent about Havila Kystruten AS' (OB:HKY) P/S ratio of 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Havila Kystruten

What Does Havila Kystruten's Recent Performance Look Like?

Recent times have been advantageous for Havila Kystruten as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 Havila Kystruten's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Havila Kystruten's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 134%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 46% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 80% per year, which is noticeably more attractive.

With this in mind, we find it intriguing that Havila Kystruten's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Havila Kystruten's P/S Mean For Investors?

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.

When you consider that Havila Kystruten's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you take the next step, you should know about the 3 warning signs for Havila Kystruten (1 makes us a bit uncomfortable!) that we have uncovered.

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.