A Piece Of The Puzzle Missing From Northbaze Group AB (publ)'s (STO:NBZ) 26% Share Price Climb

Those holding Northbaze Group AB (publ) (STO:NBZ) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 35% over that time.

Even after such a large jump in price, it's still not a stretch to say that Northbaze Group's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Consumer Durables industry in Sweden, where the median P/S ratio is around 0.8x. 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 Northbaze Group

How Has Northbaze Group Performed Recently?

While the industry has experienced revenue growth lately, Northbaze Group's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Northbaze Group will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

Northbaze 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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 20%. As a result, revenue from three years ago have also fallen 9.9% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should demonstrate the company's robustness, generating growth of 69% as estimated by the lone analyst watching the company. Meanwhile, the broader industry is forecast to contract by 1.4%, which would indicate the company is doing very well.

With this information, we find it odd that Northbaze Group is trading at a fairly similar P/S to the industry. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

What We Can Learn From Northbaze Group's P/S?

Northbaze Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

We note that even though Northbaze Group trades at a similar P/S as the rest of the industry, it far eclipses them in terms of forecasted revenue growth. We assume that investors are attributing some risk to the company's future revenues, keeping it from trading at a higher P/S. The market could be pricing in the event that tough industry conditions will impact future revenues. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Northbaze Group (including 2 which are a bit unpleasant).

If these risks are making you reconsider your opinion on Northbaze Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com