Not Many Are Piling Into Kjell Group AB (publ) (STO:KJELL) Stock Yet As It Plummets 30%

Kjell Group AB (publ) (STO:KJELL) shareholders won't be pleased to see that the share price has had a very rough month, dropping 30% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 40% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Kjell Group's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in Sweden is also close to 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Kjell Group

What Does Kjell Group's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Kjell Group's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Kjell Group will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

Kjell Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.3%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 29% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.6% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 2.5%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Kjell Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Kjell Group's P/S?

Following Kjell Group's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

Despite enticing revenue growth figures that outpace the industry, Kjell Group's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Kjell Group that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.