Polygiene Group AB (STO:POLYG) Doing What It Can To Lift Shares

With a median price-to-sales (or "P/S") ratio of close to 2.9x in the Chemicals industry in Sweden, you could be forgiven for feeling indifferent about Polygiene Group AB's (STO:POLYG) P/S ratio of 3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Polygiene Group

How Has Polygiene Group Performed Recently?

Recent times haven't been great for Polygiene Group as its revenue has been falling quicker than most other companies. One possibility is that the P/S is moderate because investors think the company's revenue trend will eventually fall in line with most others in the industry. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Polygiene Group would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 23%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 11% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 24% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 4.9% growth forecast for the broader industry.

In light of this, it's curious that Polygiene Group's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

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.

We've established that Polygiene Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Polygiene Group you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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