After Leaping 25% Gruvaktiebolaget Viscaria (STO:VISC) Shares Are Not Flying Under The Radar

Gruvaktiebolaget Viscaria (STO:VISC) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.5% in the last twelve months.

After such a large jump in price, you could be forgiven for thinking Gruvaktiebolaget Viscaria is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.6x, considering almost half the companies in Sweden's Metals and Mining industry have P/S ratios below 1.3x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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How Gruvaktiebolaget Viscaria Has Been Performing

Recent times haven't been great for Gruvaktiebolaget Viscaria as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. However, if this isn't the case, investors might get caught out paying too much for the stock.

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How Is Gruvaktiebolaget Viscaria's Revenue Growth Trending?

In order to justify its P/S ratio, Gruvaktiebolaget Viscaria would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 21% last year. Pleasingly, revenue has also lifted 97% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 58% per year during the coming three years according to the only analyst following the company. With the industry only predicted to deliver 4.1% each year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Gruvaktiebolaget Viscaria's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Gruvaktiebolaget Viscaria's P/S?

The strong share price surge has lead to Gruvaktiebolaget Viscaria's P/S soaring as well. 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.

Our look into Gruvaktiebolaget Viscaria shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Gruvaktiebolaget Viscaria.

If you're unsure about the strength of Gruvaktiebolaget Viscaria's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.