Acuvi AB (STO:ACUVI) Shares Fly 27% But Investors Aren't Buying For Growth

Acuvi AB (STO:ACUVI) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 53% share price decline over the last year.

Although its price has surged higher, Acuvi's price-to-sales (or "P/S") ratio of 1.2x might still make it look like a buy right now compared to the Electrical industry in Sweden, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Acuvi

What Does Acuvi's Recent Performance Look Like?

Recent times haven't been great for Acuvi as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is Acuvi's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Acuvi'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 30%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. 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 year should generate growth of 10% as estimated by the sole analyst watching the company. That's shaping up to be materially lower than the 147% growth forecast for the broader industry.

In light of this, it's understandable that Acuvi's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Despite Acuvi's share price climbing recently, its P/S still lags most other companies. 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 Acuvi maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Acuvi is showing 4 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Acuvi's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.