Nexam Chemical Holding AB (publ)'s (STO:NEXAM) Share Price Is Matching Sentiment Around Its Revenues

With a price-to-sales (or "P/S") ratio of 1.7x Nexam Chemical Holding AB (publ) (STO:NEXAM) may be sending bullish signals at the moment, given that almost half of all the Chemicals companies in Sweden have P/S ratios greater than 3.4x and even P/S higher than 9x 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 limited.

View our latest analysis for Nexam Chemical Holding

How Nexam Chemical Holding Has Been Performing

With its revenue growth in positive territory compared to the declining revenue of most other companies, Nexam Chemical Holding has been doing quite well of late. One possibility is that the P/S ratio is low because investors think the company's revenue is going to fall away like everyone else's soon. Those who are bullish on Nexam Chemical Holding will be hoping that this isn't the case and the company continues to beat out the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nexam Chemical Holding.

How Is Nexam Chemical Holding's Revenue Growth Trending?

Nexam Chemical Holding's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.1%. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 3.7% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 14% as estimated by the one analyst watching the company. With the industry predicted to deliver 59% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Nexam Chemical Holding's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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 Nexam Chemical Holding's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Nexam Chemical Holding is showing 1 warning sign in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.