Investors Still Waiting For A Pull Back In Billerud AB (publ) (STO:BILL)

There wouldn't be many who think Billerud AB (publ)'s (STO:BILL) price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S for the Packaging industry in Sweden is similar at about 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Billerud

How Billerud Has Been Performing

While the industry has experienced revenue growth lately, Billerud's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Billerud's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Billerud's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.4%. Even so, admirably revenue has lifted 72% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 1.2% each year during the coming three years according to the seven analysts following the company. With the industry predicted to deliver 2.8% growth per annum, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Billerud's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Billerud's P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A Billerud's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Packaging industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 3 warning signs for Billerud you should be aware of, and 1 of them can't be ignored.

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.