There's No Escaping Boule Diagnostics AB (publ)'s (STO:BOUL) Muted Revenues

With a price-to-sales (or "P/S") ratio of 0.7x Boule Diagnostics AB (publ) (STO:BOUL) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in Sweden have P/S ratios greater than 4.7x and even P/S higher than 10x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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See our latest analysis for Boule Diagnostics

How Has Boule Diagnostics Performed Recently?

Boule Diagnostics hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Boule Diagnostics' 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?

The only time you'd be truly comfortable seeing a P/S as depressed as Boule Diagnostics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 9.1% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 5.7% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next three years should generate growth of 4.5% per annum as estimated by the only analyst watching the company. With the industry predicted to deliver 12% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Boule Diagnostics' P/S is falling short industry peers. 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 Boule Diagnostics' P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of Boule Diagnostics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Boule Diagnostics that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.