Sentiment Still Eluding mySafety Group AB (STO:SAFETY B)

It's not a stretch to say that mySafety Group AB's (STO:SAFETY B) price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" for companies in the IT industry in Sweden, where the median P/S ratio is around 0.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for mySafety Group

How Has mySafety Group Performed Recently?

mySafety Group certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For mySafety Group?

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

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Weighing the recent medium-term upward revenue trajectory against the broader industry's one-year forecast for contraction of 1.9% shows it's a great look while it lasts.

With this in mind, we find it intriguing that mySafety Group's P/S matches its industry peers. It looks like most investors are not convinced the company can maintain its recent positive growth rate in the face of a shrinking broader industry.

The Final Word

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.

Our examination of mySafety Group revealed its growing revenue over the medium-term hasn't helped elevate its P/S above that of the industry, which is surprising given the industry is set to shrink. There could be some unobserved threats to revenue preventing the P/S ratio from outpacing the industry much like its revenue performance. One major risk is whether its revenue trajectory can keep outperforming under these tough industry conditions. The fact that the company's relative performance has not provided a kick to the share price suggests that some investors are anticipating revenue instability.

And what about other risks? Every company has them, and we've spotted 4 warning signs for mySafety Group (of which 3 are a bit concerning!) you should know about.

If you're unsure about the strength of mySafety Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.