After Leaping 27% KebNi AB (publ) (STO:KEBNI B) Shares Are Not Flying Under The Radar

The KebNi AB (publ) (STO:KEBNI B) share price has done very well over the last month, posting an excellent gain of 27%. Notwithstanding the latest gain, the annual share price return of 6.2% isn't as impressive.

After such a large jump in price, given close to half the companies operating in Sweden's Communications industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider KebNi as a stock to potentially avoid with its 3.2x 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 as high as it is.

We've discovered 4 warning signs about KebNi. View them for free.

Check out our latest analysis for KebNi

How Has KebNi Performed Recently?

With its revenue growth in positive territory compared to the declining revenue of most other companies, KebNi has been doing quite well of late. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. If not, then existing shareholders might 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 KebNi 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 high as KebNi's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 55% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 26% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 2.6% growth forecast for the broader industry.

With this in mind, it's not hard to understand why KebNi's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The large bounce in KebNi's shares has lifted the company's P/S handsomely. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into KebNi shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 4 warning signs for KebNi (1 is potentially serious!) that we have uncovered.

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.