Even With A 31% Surge, Cautious Investors Are Not Rewarding Moment Group AB's (STO:MOMENT) Performance Completely

Moment Group AB (STO:MOMENT) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

In spite of the firm bounce in price, it's still not a stretch to say that Moment Group's price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Entertainment industry in Sweden, where the median P/S ratio is around 0.6x. 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.

We've discovered 2 warning signs about Moment Group. View them for free.

View our latest analysis for Moment Group

How Has Moment Group Performed Recently?

We'd have to say that with no tangible growth over the last year, Moment Group's revenue has been unimpressive. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Moment Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Moment Group's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Moment Group's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. However, a few strong years before that means that it was still able to grow revenue by an impressive 121% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 3.4% shows it's noticeably more attractive.

With this information, we find it interesting that Moment Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now Moment Group's P/S is back within range of the industry median. 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.

We've established that Moment Group currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Having said that, be aware Moment Group is showing 2 warning signs in our investment analysis, 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.