KebNi AB (publ) (STO:KEBNI B) Not Lagging Industry On Growth Or Pricing

When close to half the companies in the Communications industry in Sweden have price-to-sales ratios (or "P/S") below 2x, you may consider KebNi AB (publ) (STO:KEBNI B) as a stock to potentially avoid with its 3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for KebNi

How Has KebNi Performed Recently?

Recent times have been pleasing for KebNi as its revenue has risen in spite of the industry's average revenue going into reverse. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. 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.

How Is KebNi's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 195% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 73% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 3.6%, which is noticeably less attractive.

With this in mind, it's not hard to understand why KebNi's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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.

We've established that KebNi maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Communications industry, as expected. 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.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for KebNi that you should be aware of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.