Benign Growth For Niutech Group AB (NGM:NIUTEC) Underpins Stock's 31% Plummet

Unfortunately for some shareholders, the Niutech Group AB (NGM:NIUTEC) share price has dived 31% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Since its price has dipped substantially, Niutech Group may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Electrical industry in Sweden have P/S ratios greater than 1.3x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Niutech Group

How Niutech Group Has Been Performing

Recent times have been advantageous for Niutech Group as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is Niutech Group's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 96%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.4% as estimated by the one analyst watching the company. Meanwhile, the broader industry is forecast to expand by 21%, which paints a poor picture.

With this in consideration, we find it intriguing that Niutech Group's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Niutech Group's recently weak share price has pulled its P/S back below other Electrical companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Niutech Group's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Niutech Group (including 2 which are a bit concerning).

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.