Investor Optimism Abounds Bergman & Beving AB (publ) (STO:BERG B) But Growth Is Lacking

With a median price-to-sales (or "P/S") ratio of close to 1.7x in the Trade Distributors industry in Sweden, you could be forgiven for feeling indifferent about Bergman & Beving AB (publ)'s (STO:BERG B) P/S ratio of 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Bergman & Beving

How Bergman & Beving Has Been Performing

Bergman & Beving could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Bergman & Beving?

In order to justify its P/S ratio, Bergman & Beving would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.9%. The solid recent performance means it was also able to grow revenue by 9.9% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 1.2% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 5.5% growth forecast for the broader industry.

In light of this, it's curious that Bergman & Beving's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Bergman & Beving's P/S

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.

When you consider that Bergman & Beving's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Bergman & Beving (1 is concerning!) that you should be aware of before investing here.

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.