What You Can Learn From GomSpace Group AB (publ)'s (STO:GOMX) P/S

It's not a stretch to say that GomSpace Group AB (publ)'s (STO:GOMX) price-to-sales (or "P/S") ratio of 2.7x seems quite "middle-of-the-road" for Aerospace & Defense companies in Sweden, seeing as it matches the P/S ratio of the wider industry. 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.

Check out our latest analysis for GomSpace Group

What Does GomSpace Group's P/S Mean For Shareholders?

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. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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?

The only time you'd be comfortable seeing a P/S like GomSpace Group's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 7.8% gain to the company's revenues. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

It's interesting to note that the rest of the industry is similarly expected to grow by 15% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that GomSpace Group's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Final Word

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.

It appears to us that GomSpace Group maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Having said that, be aware GomSpace Group is showing 5 warning signs in our investment analysis, and 4 of those shouldn't be ignored.

If these risks are making you reconsider your opinion on GomSpace Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.