Checkin.Com Group AB (publ)'s (STO:CHECK) P/S Is On The Mark

Checkin.Com Group AB (publ)'s (STO:CHECK) price-to-sales (or "P/S") ratio of 7.5x may look like a poor investment opportunity when you consider close to half the companies in the Software industry in Sweden have P/S ratios below 2.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Checkin.Com Group

What Does Checkin.Com Group's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Checkin.Com Group has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Checkin.Com Group's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. Pleasingly, revenue has also lifted 279% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 32% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

In light of this, it's understandable that Checkin.Com Group'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 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.

As we suspected, our examination of Checkin.Com Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 1 warning sign for Checkin.Com Group that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.