The Kingfish Company N.V.'s (OB:KING) Business Is Trailing The Industry But Its Shares Aren't

It's not a stretch to say that The Kingfish Company N.V.'s (OB:KING) price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" for companies in the Food industry in Norway, where the median P/S ratio is around 1.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Kingfish

What Does Kingfish's P/S Mean For Shareholders?

Kingfish could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

Kingfish's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 33% gain to the company's top line. Pleasingly, revenue has also lifted 111% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 53% as estimated by the sole analyst watching the company. With the industry predicted to deliver 150% growth, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Kingfish is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Kingfish's P/S?

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.

When you consider that Kingfish's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you settle on your opinion, we've discovered 4 warning signs for Kingfish (1 is a bit concerning!) that you should be aware of.

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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.