Skandia GreenPower AS' (OB:SKAND) Shares Bounce 31% But Its Business Still Trails The Industry

Despite an already strong run, Skandia GreenPower AS (OB:SKAND) shares have been powering on, with a gain of 31% in the last thirty days. The last month tops off a massive increase of 122% in the last year.

In spite of the firm bounce in price, given about half the companies operating in Norway's Electric Utilities industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Skandia GreenPower as an attractive investment with its 0.5x 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 limited.

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View our latest analysis for Skandia GreenPower

How Skandia GreenPower Has Been Performing

Recent times have been quite advantageous for Skandia GreenPower as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Skandia GreenPower's earnings, revenue and cash flow.

How Is Skandia GreenPower's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Skandia GreenPower's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 82% last year. As a result, it also grew revenue by 8.5% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 5.2% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Skandia GreenPower is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Skandia GreenPower's P/S Mean For Investors?

Skandia GreenPower's stock price has surged recently, but its but its P/S still remains modest. 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.

In line with expectations, Skandia GreenPower maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you take the next step, you should know about the 3 warning signs for Skandia GreenPower that we have uncovered.

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.