What You Can Learn From The Kingfish Company N.V.'s (OB:KING) P/S

When you see that almost half of the companies in the Food industry in Norway have price-to-sales ratios (or "P/S") below 2x, The Kingfish Company N.V. (OB:KING) looks to be giving off some sell signals with its 3.1x P/S ratio. 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.

Check out our latest analysis for Kingfish

What Does Kingfish's Recent Performance Look Like?

There hasn't been much to differentiate Kingfish's and the industry's revenue growth lately. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

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.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 36% per year during the coming three years according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 15% per year, which is noticeably less attractive.

With this information, we can see why Kingfish is trading at such a high P/S compared to the industry. 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

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 Kingfish maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Food industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Kingfish 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com