Cyber Security 1 AB (publ) (STO:CYB1) Stock Rockets 29% But Many Are Still Ignoring The Company

Cyber Security 1 AB (publ) (STO:CYB1) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 64% share price drop in the last twelve months.

In spite of the firm bounce in price, it would still be understandable if you think Cyber Security 1 is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.1x, considering almost half the companies in Sweden's IT industry have P/S ratios above 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for Cyber Security 1

How Has Cyber Security 1 Performed Recently?

For instance, Cyber Security 1's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Cyber Security 1's earnings, revenue and cash flow.

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

The only time you'd be truly comfortable seeing a P/S as low as Cyber Security 1's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.4%. Still, the latest three year period has seen an excellent 34% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to shrink 5.3% 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. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Cyber Security 1's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Cyber Security 1's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Upon analysing the past data, we see it is unexpected that Cyber Security 1 is currently trading at a lower P/S than the rest of the industry given that its revenue growth in the past three-year years is exceeding expectations in a challenging industry. There could be some major unobserved threats to revenue preventing the P/S ratio from matching this positive performance. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. At least the risk of a price drop looks to be subdued, but investors think future revenue could see a lot of volatility.

Before you take the next step, you should know about the 4 warning signs for Cyber Security 1 that we have uncovered.

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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.