Metacon AB (publ) (STO:META) Looks Just Right With A 25% Price Jump

Metacon AB (publ) (STO:META) shares have continued their recent momentum with a 25% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Following the firm bounce in price, given close to half the companies operating in Sweden's Electrical industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider Metacon as a stock to potentially avoid with its 3.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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See our latest analysis for Metacon

What Does Metacon's P/S Mean For Shareholders?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Metacon has been doing quite well of late. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Metacon's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 226%. Pleasingly, revenue has also lifted 203% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 91% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.5% per year, which is noticeably less attractive.

In light of this, it's understandable that Metacon's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Metacon's P/S Mean For Investors?

Metacon's P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Metacon shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Metacon (3 are potentially serious!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.