Stillfront Group AB (publ) (STO:SF) Stock Rockets 26% As Investors Are Less Pessimistic Than Expected

Despite an already strong run, Stillfront Group AB (publ) (STO:SF) shares have been powering on, with a gain of 26% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 2.0% over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Stillfront Group's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Sweden's Entertainment industry is similar at about 0.7x. 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.

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What Does Stillfront Group's P/S Mean For Shareholders?

Stillfront Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Stillfront Group will help you uncover what's on the horizon.

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

In order to justify its P/S ratio, Stillfront Group would need to produce growth that's similar to 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 12%. The last three years don't look nice either as the company has shrunk revenue by 12% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 6.6% as estimated by the four analysts watching the company. Meanwhile, the broader industry is forecast to expand by 18%, which paints a poor picture.

In light of this, it's somewhat alarming that Stillfront Group's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What Does Stillfront Group's P/S Mean For Investors?

Stillfront Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our check of Stillfront Group's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Stillfront Group with six simple checks.

If you're unsure about the strength of Stillfront Group'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.