Take Care Before Jumping Onto OXE Marine AB (publ) (STO:OXE) Even Though It's 26% Cheaper

OXE Marine AB (publ) (STO:OXE) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 56% loss during that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about OXE Marine's P/S ratio of 1.1x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Sweden is also close to 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for OXE Marine

How Has OXE Marine Performed Recently?

OXE Marine has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. 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.

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

Is There Some Revenue Growth Forecasted For OXE Marine?

In order to justify its P/S ratio, OXE Marine would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 8.7% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 55% in total over the last three years. 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.

Looking ahead now, revenue is anticipated to climb by 24% per year during the coming three years according to the lone analyst following the company. That's shaping up to be materially higher than the 5.1% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that OXE Marine's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Following OXE Marine's share price tumble, its P/S is just clinging on to the industry median P/S. 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 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. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 5 warning signs for OXE Marine (of which 2 can't be ignored!) you should know about.

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.