M.O.B.A. Network AB (publ) (STO:MOBA) Stock's 25% Dive Might Signal An Opportunity But It Requires Some Scrutiny

To the annoyance of some shareholders, M.O.B.A. Network AB (publ) (STO:MOBA) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.

Since its price has dipped substantially, when close to half the companies operating in Sweden's Interactive Media and Services industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider M.O.B.A. Network as an enticing stock to check out with its 0.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for M.O.B.A. Network

What Does M.O.B.A. Network's Recent Performance Look Like?

M.O.B.A. Network could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on M.O.B.A. Network.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as M.O.B.A. Network's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.0%. In spite of this, the company still managed to deliver immense revenue growth over the last three years. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Turning to the outlook, the next year should generate growth of 40% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 25% growth forecast for the broader industry.

In light of this, it's peculiar that M.O.B.A. Network's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

M.O.B.A. Network's recently weak share price has pulled its P/S back below other Interactive Media and Services companies. 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.

A look at M.O.B.A. Network's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you take the next step, you should know about the 2 warning signs for M.O.B.A. Network (1 makes us a bit uncomfortable!) that we have uncovered.

If you're unsure about the strength of M.O.B.A. Network'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.