Revenues Tell The Story For Gruvaktiebolaget Viscaria (STO:VISC) As Its Stock Soars 26%

Gruvaktiebolaget Viscaria (STO:VISC) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Notwithstanding the latest gain, the annual share price return of 4.5% isn't as impressive.

After such a large jump in price, when almost half of the companies in Sweden's Metals and Mining industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Gruvaktiebolaget Viscaria as a stock not worth researching with its 7.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Gruvaktiebolaget Viscaria

What Does Gruvaktiebolaget Viscaria's P/S Mean For Shareholders?

Recent times have been pleasing for Gruvaktiebolaget Viscaria as its revenue has risen in spite of the industry's average revenue going into reverse. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Gruvaktiebolaget Viscaria?

Gruvaktiebolaget Viscaria's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 27%. Pleasingly, revenue has also lifted 272% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 87% per annum during the coming three years according to the only analyst following the company. That's shaping up to be materially higher than the 4.1% per year growth forecast for the broader industry.

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.

The Key Takeaway

Shares in Gruvaktiebolaget Viscaria have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 we suspected, our examination of Gruvaktiebolaget Viscaria's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - Gruvaktiebolaget Viscaria has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.

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.