Slammed 56% SolTech Energy Sweden AB (publ) (STO:SOLT) Screens Well Here But There Might Be A Catch

To the annoyance of some shareholders, SolTech Energy Sweden AB (publ) (STO:SOLT) shares are down a considerable 56% 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 91% loss during that time.

After such a large drop in price, SolTech Energy Sweden may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Electrical industry in Sweden have P/S ratios greater than 1.9x and even P/S higher than 6x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for SolTech Energy Sweden

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

For example, consider that SolTech Energy Sweden's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. 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.

Although there are no analyst estimates available for SolTech Energy Sweden, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For SolTech Energy Sweden?

The only time you'd be truly comfortable seeing a P/S as low as SolTech Energy Sweden's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 19% 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 69% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

When compared to the industry's one-year growth forecast of 13%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that SolTech Energy Sweden's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does SolTech Energy Sweden's P/S Mean For Investors?

SolTech Energy Sweden's recently weak share price has pulled its P/S back below other Electrical companies. 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.

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. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. 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 4 warning signs for SolTech Energy Sweden (3 are a bit unpleasant!) that we have uncovered.

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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.