Revenues Tell The Story For The Kingfish Company N.V. (OB:KING)

The Kingfish Company N.V.'s (OB:KING) price-to-sales (or "P/S") ratio of 3.9x may not look like an appealing investment opportunity when you consider close to half the companies in the Food industry in Norway have P/S ratios below 2.3x. 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 Kingfish

What Does Kingfish's Recent Performance Look Like?

Recent times have been advantageous for Kingfish as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Kingfish's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 43% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 53% over the next year. That's shaping up to be materially higher than the 17% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Kingfish's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Kingfish's P/S

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.

Our look into Kingfish shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Kingfish is showing 4 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.