Transfer Group AB (publ) (NGM:TRNSF) Stock Rockets 27% But Many Are Still Ignoring The Company

Transfer Group AB (publ) (NGM:TRNSF) shareholders have had their patience rewarded with a 27% share price jump in the last month. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, there still wouldn't be many who think Transfer Group's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Sweden's Commercial Services industry is similar at about 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Transfer Group

How Transfer Group Has Been Performing

Recent times have been quite advantageous for Transfer Group as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Transfer Group?

Transfer Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 117%. Pleasingly, revenue has also lifted 206% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 4.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Transfer Group's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Transfer Group's P/S Mean For Investors?

Transfer Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Transfer Group currently trades on a 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 can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You always need to take note of risks, for example - Transfer Group has 2 warning signs we think you should be aware of.

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.