Wästbygg Gruppen AB (publ)'s (STO:WBGR B) Business And Shares Still Trailing The Industry

Wästbygg Gruppen AB (publ)'s (STO:WBGR B) price-to-sales (or "P/S") ratio of 0.1x may look like a very appealing investment opportunity when you consider close to half the companies in the Real Estate industry in Sweden have P/S ratios greater than 5.6x. 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 Wästbygg Gruppen

What Does Wästbygg Gruppen's Recent Performance Look Like?

Wästbygg Gruppen 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. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Wästbygg Gruppen.

Is There Any Revenue Growth Forecasted For Wästbygg Gruppen?

In order to justify its P/S ratio, Wästbygg Gruppen would need to produce anemic growth that's substantially trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 28% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 14% as estimated by the one analyst watching the company. With the industry predicted to deliver 6.8% growth, that's a disappointing outcome.

With this information, we are not surprised that Wästbygg Gruppen is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It's clear to see that Wästbygg Gruppen maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - Wästbygg Gruppen has 2 warning signs we think you should be aware of.

If you're unsure about the strength of Wästbygg Gruppen'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.