Investors Aren't Entirely Convinced By SolTech Energy Sweden AB (publ)'s (STO:SOLT) Revenues

With a price-to-sales (or "P/S") ratio of 0.7x SolTech Energy Sweden AB (publ) (STO:SOLT) may be sending bullish signals at the moment, given that almost half of all the Electrical companies in Sweden have P/S ratios greater than 2.3x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for SolTech Energy Sweden

How Has SolTech Energy Sweden Performed Recently?

Recent times have been quite advantageous for SolTech Energy Sweden as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on SolTech Energy Sweden will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on SolTech Energy Sweden's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, SolTech Energy Sweden would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 118% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 84% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that SolTech Energy Sweden is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From SolTech Energy Sweden's P/S?

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.

We're very surprised to see SolTech Energy Sweden currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for SolTech Energy Sweden (2 are a bit concerning) you should be aware of.

If you're unsure about the strength of SolTech Energy Sweden's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.