Not Many Are Piling Into SolTech Energy Sweden AB (publ) (STO:SOLT) Stock Yet As It Plummets 26%

To the annoyance of some shareholders, SolTech Energy Sweden AB (publ) (STO:SOLT) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

Following the heavy fall in price, SolTech Energy Sweden may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Electrical industry in Sweden have P/S ratios greater than 1.5x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for SolTech Energy Sweden

What Does SolTech Energy Sweden's Recent Performance Look Like?

It looks like revenue growth has deserted SolTech Energy Sweden recently, which is not something to boast about. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on SolTech Energy Sweden will help you shine a light on its historical performance.

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like SolTech Energy Sweden's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Despite the lack of growth, the company was still able to deliver immense revenue growth over the last three years. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Comparing that to the industry, which is only predicted to deliver 30% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that SolTech Energy Sweden's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

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

The southerly movements of SolTech Energy Sweden's shares means its P/S is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

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.

Before you take the next step, you should know about the 2 warning signs for SolTech Energy Sweden (1 shouldn't be ignored!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.