Saxlund Group AB (publ)'s (STO:SAXG) P/S Is Still On The Mark Following 27% Share Price Bounce

The Saxlund Group AB (publ) (STO:SAXG) share price has done very well over the last month, posting an excellent gain of 27%. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 91% share price drop in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Saxlund 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. 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.

View our latest analysis for Saxlund Group

How Has Saxlund Group Performed Recently?

It looks like revenue growth has deserted Saxlund Group recently, which is not something to boast about. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S from rising. If not, then existing shareholders may be feeling hopeful 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 Saxlund Group will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Saxlund Group?

In order to justify its P/S ratio, Saxlund Group would need to produce growth that's similar to the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period was better as it's delivered a decent 19% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

It's interesting to note that the rest of the industry is similarly expected to grow by 6.5% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Saxlund Group is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Bottom Line On Saxlund Group's P/S

Saxlund 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 Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we've seen, Saxlund Group's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Saxlund Group, and understanding these should be part of your investment process.

If you're unsure about the strength of Saxlund Group'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.