Oneflow AB (publ)'s (STO:ONEF) 37% Jump Shows Its Popularity With Investors

Oneflow AB (publ) (STO:ONEF) shareholders are no doubt pleased to see that the share price has bounced 37% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 40% over that time.

Since its price has surged higher, when almost half of the companies in Sweden's Software industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider Oneflow as a stock not worth researching with its 5.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Oneflow

What Does Oneflow's P/S Mean For Shareholders?

There hasn't been much to differentiate Oneflow's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may 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 Oneflow will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Oneflow's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 31% each year as estimated by the sole analyst watching the company. That's shaping up to be materially higher than the 18% per year growth forecast for the broader industry.

In light of this, it's understandable that Oneflow's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Oneflow's P/S?

The strong share price surge has lead to Oneflow's P/S soaring as well. 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.

Our look into Oneflow shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Oneflow that you need to take into consideration.

If these risks are making you reconsider your opinion on Oneflow, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.