Many Still Looking Away From Navigo Invest AB (publ) (STO:NAVIGO STAM)

Navigo Invest AB (publ)'s (STO:NAVIGO STAM) price-to-sales (or "P/S") ratio of 0.6x might make it look like a strong buy right now compared to the Capital Markets industry in Sweden, where around half of the companies have P/S ratios above 4.3x and even P/S above 11x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Navigo Invest

How Navigo Invest Has Been Performing

With revenue growth that's superior to most other companies of late, Navigo Invest has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 out of favour.

Keen to find out how analysts think Navigo Invest's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Navigo Invest's to be considered reasonable.

Retrospectively, the last year delivered an explosive gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 68% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 52% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

In light of this, it's peculiar that Navigo Invest's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

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.

A look at Navigo Invest's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 3 warning signs we've spotted with Navigo Invest (including 1 which shouldn't be ignored).

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

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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.

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