BlueNord ASA (OB:BNOR) Not Flying Under The Radar

When close to half the companies in the Oil and Gas industry in Norway have price-to-sales ratios (or "P/S") below 1.1x, you may consider BlueNord ASA (OB:BNOR) as a stock to potentially avoid with its 2.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for BlueNord

What Does BlueNord's P/S Mean For Shareholders?

BlueNord has been struggling lately as its revenue has declined faster than most other companies. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. If not, then existing shareholders may be very nervous about the viability of the share price.

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

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

BlueNord's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 18%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 29% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue growth will be highly resilient over the next three years growing by 17% each year. Meanwhile, the broader industry is forecast to contract by 4.0% per annum, which would indicate the company is doing very well.

With this in consideration, we understand why BlueNord's P/S is a cut above its industry peers. At this time, shareholders aren't keen to offload something that is potentially eyeing a much more prosperous future.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We can see that BlueNord maintains its high P/S on the strength of its forecast growth potentially beating a struggling industry, as expected. Outperforming the industry in this manner looks to have provided investors with a bit of confidence that the future will be bright, bolstering the P/S. Our only concern is whether its revenue trajectory can keep outperforming under these tough industry conditions. Otherwise, it's hard to see the share price falling strongly in the near future under the current growth expectations.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with BlueNord (at least 1 which is potentially serious), and understanding these should be part of your investment process.

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.