Aker BioMarine AS' (OB:AKBM) Revenues Are Not Doing Enough For Some Investors

Aker BioMarine AS' (OB:AKBM) price-to-sales (or "P/S") ratio of 1.1x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Food industry in Norway have P/S ratios greater than 2.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Aker BioMarine

How Aker BioMarine Has Been Performing

Aker BioMarine certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

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

The only time you'd be truly comfortable seeing a P/S as low as Aker BioMarine's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 48% gain to the company's top line. Revenue has also lifted 28% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 26% as estimated by the dual analysts watching the company. With the industry predicted to deliver 12% growth, that's a disappointing outcome.

In light of this, it's understandable that Aker BioMarine's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Aker BioMarine's P/S?

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.

It's clear to see that Aker BioMarine maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Aker BioMarine's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Aker BioMarine you should know about.

If you're unsure about the strength of Aker BioMarine'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.