NP3 Fastigheter AB (publ)'s (STO:NP3) Price In Tune With Revenues

When close to half the companies in the Real Estate industry in Sweden have price-to-sales ratios (or "P/S") below 5.5x, you may consider NP3 Fastigheter AB (publ) (STO:NP3) as a stock to potentially avoid with its 8.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for NP3 Fastigheter

How Has NP3 Fastigheter Performed Recently?

NP3 Fastigheter could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very 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.

How Is NP3 Fastigheter's Revenue Growth Trending?

In order to justify its P/S ratio, NP3 Fastigheter would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.2%. The latest three year period has also seen an excellent 49% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 5.2%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that NP3 Fastigheter's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On NP3 Fastigheter's P/S

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.

We've established that NP3 Fastigheter maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Real Estate industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 4 warning signs for NP3 Fastigheter (1 is potentially serious!) that you need to be mindful of.

If these risks are making you reconsider your opinion on NP3 Fastigheter, 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.