Cyber Security 1 AB (publ) (STO:CYB1) Might Not Be As Mispriced As It Looks

When you see that almost half of the companies in the IT industry in Sweden have price-to-sales ratios (or "P/S") above 0.8x, Cyber Security 1 AB (publ) (STO:CYB1) looks to be giving off some buy signals with its 0.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Cyber Security 1

How Has Cyber Security 1 Performed Recently?

The recent revenue growth at Cyber Security 1 would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on Cyber Security 1 will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Cyber Security 1, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Cyber Security 1 would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 7.5% gain to the company's revenues. The latest three year period has also seen an excellent 106% 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.

Comparing that to the industry, which is predicted to shrink 1.7% in the next 12 months, the company's positive momentum based on recent medium-term revenue results is a bright spot for the moment.

With this information, we find it very odd that Cyber Security 1 is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

The Bottom Line On Cyber Security 1's 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.

Our examination of Cyber Security 1 revealed that despite growing revenue over the medium-term in a shrinking industry, the P/S doesn't reflect this as it's lower than the industry average. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this positive performance. Amidst challenging industry conditions, perhaps a key concern is whether the company can sustain its superior revenue growth trajectory. At least the risk of a price drop looks to be subdued, but investors think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Cyber Security 1 (3 are concerning) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.