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- OM:INTRUM
Intrum AB (publ) (STO:INTRUM) Investors Are Less Pessimistic Than Expected
With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Commercial Services industry in Sweden, you could be forgiven for feeling indifferent about Intrum AB (publ)'s (STO:INTRUM) P/S ratio of 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Check out our latest analysis for Intrum
How Has Intrum Performed Recently?
With revenue growth that's inferior to most other companies of late, Intrum has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Intrum.How Is Intrum's Revenue Growth Trending?
The only time you'd be comfortable seeing a P/S like Intrum's is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a decent 8.9% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 23% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.04% as estimated by the three analysts watching the company. That's not great when the rest of the industry is expected to grow by 8.1%.
With this in consideration, we think it doesn't make sense that Intrum's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.
The Final Word
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.
Our check of Intrum's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.
Before you settle on your opinion, we've discovered 2 warning signs for Intrum (1 is a bit concerning!) that you should be aware of.
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.
About OM:INTRUM
Intrum
Provides credit management services in Europe and internationally.
Undervalued with moderate growth potential.