Investors Don't See Light At End Of Niutech Group AB's (NGM:NIUTEC) Tunnel And Push Stock Down 31%

Niutech Group AB (NGM:NIUTEC) shareholders that were waiting for something to happen have been dealt a blow with a 31% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 92% loss during that time.

After such a large drop in price, 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 1.8x and even P/S higher than 5x 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.

Our free stock report includes 3 warning signs investors should be aware of before investing in Niutech Group. Read for free now.

See our latest analysis for Niutech Group

What Does Niutech Group's Recent Performance Look Like?

Recent times have been advantageous for Niutech Group as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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.

Is There Any Revenue Growth Forecasted For Niutech Group?

In order to justify its P/S ratio, Niutech Group would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 36%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 29% per year as estimated by the two analysts watching the company. With the industry predicted to deliver 23% growth per annum, that's a disappointing outcome.

In light of this, it's understandable that Niutech Group's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Key Takeaway

Niutech Group's P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's clear to see that Niutech Group maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Niutech Group's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for Niutech Group you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.