There's No Escaping Probi AB (publ)'s (STO:PROB) Muted Revenues Despite A 43% Share Price Rise

Probi AB (publ) (STO:PROB) shareholders have had their patience rewarded with a 43% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 66%.

Even after such a large jump in price, Probi may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.7x, since almost half of all companies in the Biotechs industry in Sweden have P/S ratios greater than 14.5x and even P/S higher than 30x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Probi

How Probi Has Been Performing

Probi 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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Probi's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Probi's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Probi's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.4%. The last three years don't look nice either as the company has shrunk revenue by 17% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 9.5% over the next year. That's shaping up to be materially lower than the 45% growth forecast for the broader industry.

In light of this, it's understandable that Probi's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Probi's P/S

Shares in Probi have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Probi maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Probi with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Probi'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com