Austevoll Seafood ASA's (OB:AUSS) Revenues Are Not Doing Enough For Some Investors

With a price-to-sales (or "P/S") ratio of 0.5x Austevoll Seafood ASA (OB:AUSS) may be sending bullish signals at the moment, given that almost half of all the Food companies in Norway have P/S ratios greater than 2.4x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Austevoll Seafood

How Austevoll Seafood Has Been Performing

Austevoll Seafood could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

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

In order to justify its P/S ratio, Austevoll Seafood would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.2%. The latest three year period has also seen an excellent 45% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 11% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 17%, which is noticeably more attractive.

In light of this, it's understandable that Austevoll Seafood's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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 Austevoll Seafood 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Austevoll Seafood (1 is a bit concerning) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.