Lohilo Foods AB (publ)'s (NGM:LOHILO) Revenues Are Not Doing Enough For Some Investors

Lohilo Foods AB (publ)'s (NGM:LOHILO) price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Food industry in Sweden, where around half of the companies have P/S ratios above 1x and even P/S above 3x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Lohilo Foods

How Lohilo Foods Has Been Performing

Recent times have been advantageous for Lohilo Foods as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Lohilo Foods would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 9.4% gain to the company's revenues. Still, lamentably revenue has fallen 19% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 9.6% each year during the coming three years according to the sole analyst following the company. With the industry predicted to deliver 98% growth each year, the company is positioned for a weaker revenue result.

With this information, we can see why Lohilo Foods is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Lohilo Foods' P/S

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.

As we suspected, our examination of Lohilo Foods' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Lohilo Foods 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.