There's No Escaping Aker BioMarine AS' (OB:AKBM) Muted Revenues

Aker BioMarine AS' (OB:AKBM) price-to-sales (or "P/S") ratio of 1.2x might make it look like a buy right now compared to the Food industry in Norway, where around half of the companies have P/S ratios above 2.3x and even P/S above 8x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Aker BioMarine

What Does Aker BioMarine's Recent Performance Look Like?

Recent times haven't been great for Aker BioMarine as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Aker BioMarine will help you uncover what's on the horizon.

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

Aker BioMarine's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 21%. The latest three year period has also seen a 16% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 15% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 131% per year, which is noticeably more attractive.

In light of this, it's understandable that Aker BioMarine's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Aker BioMarine's P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Aker BioMarine maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Aker BioMarine with six simple checks will allow you to discover any risks that could be an issue.

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.