QleanAir AB (publ) (STO:QAIR) Soars 28% But It's A Story Of Risk Vs Reward

QleanAir AB (publ) (STO:QAIR) shares have continued their recent momentum with a 28% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 6.0% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that QleanAir's price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Building industry in Sweden, where the median P/S ratio is around 1.2x. 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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Check out our latest analysis for QleanAir

How Has QleanAir Performed Recently?

QleanAir could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is QleanAir's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 6.4% decrease to the company's top line. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 12% over the next year. With the industry only predicted to deliver 3.0%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that QleanAir is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

QleanAir appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Looking at QleanAir'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.

Plus, you should also learn about these 3 warning signs we've spotted with QleanAir (including 1 which is a bit concerning).

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.