Investors Appear Satisfied With NP3 Fastigheter AB (publ)'s (STO:NP3) Prospects

NP3 Fastigheter AB (publ)'s (STO:NP3) price-to-sales (or "P/S") ratio of 6.6x may not look like an appealing investment opportunity when you consider close to half the companies in the Real Estate industry in Sweden have P/S ratios below 4.6x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for NP3 Fastigheter

What Does NP3 Fastigheter's Recent Performance Look Like?

Recent revenue growth for NP3 Fastigheter has been in line with the industry. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think NP3 Fastigheter's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should outperform the industry for P/S ratios like NP3 Fastigheter's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 62% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 7.0% during the coming year according to the sole analyst following the company. With the industry only predicted to deliver 4.7%, the company is positioned for a stronger revenue result.

With this information, we can see why NP3 Fastigheter is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does NP3 Fastigheter's P/S Mean For Investors?

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.

Our look into NP3 Fastigheter shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 5 warning signs for NP3 Fastigheter you should be aware of, and 1 of them shouldn't be ignored.

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.