The Market Doesn't Like What It Sees From Grieg Seafood ASA's (OB:GSF) Revenues Yet As Shares Tumble 25%

The Grieg Seafood ASA (OB:GSF) share price has fared very poorly over the last month, falling by a substantial 25%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 19% share price drop.

Since its price has dipped substantially, it would be understandable if you think Grieg Seafood is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.8x, considering almost half the companies in Norway's Food industry have P/S ratios above 2.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Grieg Seafood

How Has Grieg Seafood Performed Recently?

There hasn't been much to differentiate Grieg Seafood's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

Keen to find out how analysts think Grieg Seafood's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Grieg Seafood?

In order to justify its P/S ratio, Grieg 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 5.3%. Pleasingly, revenue has also lifted 59% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 6.9% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 224% each year, which is noticeably more attractive.

With this in consideration, its clear as to why Grieg Seafood's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The southerly movements of Grieg Seafood's shares means its P/S is now sitting at a pretty low level. 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.

As we suspected, our examination of Grieg Seafood's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Grieg Seafood (of which 2 are potentially serious!) you should know about.

If you're unsure about the strength of Grieg Seafood'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.