Further Upside For OXE Marine AB (publ) (STO:OXE) Shares Could Introduce Price Risks After 32% Bounce

OXE Marine AB (publ) (STO:OXE) shares have continued their recent momentum with a 32% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that OXE Marine's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Machinery industry in Sweden, where the median P/S ratio is around 1.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for OXE Marine

How Has OXE Marine Performed Recently?

With revenue that's retreating more than the industry's average of late, OXE Marine has been very sluggish. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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

Is There Some Revenue Growth Forecasted For OXE Marine?

There's an inherent assumption that a company should be matching the industry for P/S ratios like OXE Marine's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.9%. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 21% per year as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.2% per annum, which is noticeably less attractive.

With this information, we find it interesting that OXE Marine is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Its shares have lifted substantially and now OXE Marine's P/S is back within range of the industry median. 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.

Looking at OXE Marine'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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for OXE Marine (3 are a bit concerning) you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.