The Market Lifts Aktiebolaget Fastator (publ) (STO:FASTAT) Shares 30% But It Can Do More

Aktiebolaget Fastator (publ) (STO:FASTAT) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 45% over that time.

Although its price has surged higher, when around half the companies operating in Sweden's Real Estate industry have price-to-sales ratios (or "P/S") above 5.4x, you may still consider Aktiebolaget Fastator as an incredibly enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Aktiebolaget Fastator

What Does Aktiebolaget Fastator's P/S Mean For Shareholders?

For example, consider that Aktiebolaget Fastator's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Aktiebolaget Fastator's earnings, revenue and cash flow.

How Is Aktiebolaget Fastator's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. Even so, admirably revenue has lifted 35% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 6.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Aktiebolaget Fastator's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Aktiebolaget Fastator's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

Our examination of Aktiebolaget Fastator revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about these 4 warning signs we've spotted with Aktiebolaget Fastator.

If these risks are making you reconsider your opinion on Aktiebolaget Fastator, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.