GomSpace Group AB (publ)'s (STO:GOMX) Shareholders Might Be Looking For Exit

With a median price-to-sales (or "P/S") ratio of close to 2.7x in the Aerospace & Defense industry in Sweden, you could be forgiven for feeling indifferent about GomSpace Group AB (publ)'s (STO:GOMX) P/S ratio, which comes in at about the same. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for GomSpace Group

How Has GomSpace Group Performed Recently?

The revenue growth achieved at GomSpace Group over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on GomSpace Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for GomSpace Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is GomSpace Group's Revenue Growth Trending?

GomSpace Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. Revenue has also lifted 16% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 17% shows it's noticeably less attractive.

With this information, we find it interesting that GomSpace Group is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that GomSpace Group's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Having said that, be aware GomSpace Group is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored.

If you're unsure about the strength of GomSpace Group'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.