Teneo AI AB (publ)'s (STO:TENEO) Shares Leap 31% Yet They're Still Not Telling The Full Story

Teneo AI AB (publ) (STO:TENEO) shares have continued their recent momentum with a 31% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 58%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Teneo AI's P/S ratio of 3x, since the median price-to-sales (or "P/S") ratio for the Software industry in Sweden is also close to 2.7x. 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.

Check out our latest analysis for Teneo AI

What Does Teneo AI's Recent Performance Look Like?

Teneo AI certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Teneo AI.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Teneo AI's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 33% last year. Pleasingly, revenue has also lifted 114% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 40% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 19% each year, which is noticeably less attractive.

With this information, we find it interesting that Teneo AI is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Teneo AI's P/S?

Teneo AI's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Despite enticing revenue growth figures that outpace the industry, Teneo AI's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You need to take note of risks, for example - Teneo AI has 4 warning signs (and 1 which is significant) we think you should know about.

If you're unsure about the strength of Teneo AI'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.