Clavister Holding AB (publ.) (STO:CLAV) Stock Rockets 38% But Many Are Still Ignoring The Company

Those holding Clavister Holding AB (publ.) (STO:CLAV) shares would be relieved that the share price has rebounded 38% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, Clavister Holding AB (publ.)'s price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Software industry in Sweden, where around half of the companies have P/S ratios above 1.9x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Clavister Holding AB (publ.)

How Has Clavister Holding AB (publ.) Performed Recently?

Recent times haven't been great for Clavister Holding AB (publ.) as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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 Clavister Holding AB (publ.).

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

Clavister Holding AB (publ.)'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The latest three year period has also seen a 12% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 18% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

In light of this, it's peculiar that Clavister Holding AB (publ.)'s P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Clavister Holding AB (publ.)'s P/S

The latest share price surge wasn't enough to lift Clavister Holding AB (publ.)'s P/S close to the industry median. 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.

A look at Clavister Holding AB (publ.)'s revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You need to take note of risks, for example - Clavister Holding AB (publ.) has 5 warning signs (and 3 which shouldn't be ignored) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.