Meriaura Group Oyj (STO:MERIS) Might Not Be As Mispriced As It Looks

There wouldn't be many who think Meriaura Group Oyj's (STO:MERIS) price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S for the Electrical industry in Sweden is similar at about 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Meriaura Group Oyj

How Has Meriaura Group Oyj Performed Recently?

Recent times have been advantageous for Meriaura Group Oyj as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 185% per year over the next three years. That's shaping up to be materially higher than the 8.1% per year growth forecast for the broader industry.

In light of this, it's curious that Meriaura Group Oyj's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Looking at Meriaura Group Oyj's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Meriaura Group Oyj.

If these risks are making you reconsider your opinion on Meriaura Group Oyj, 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.