Investors Continue Waiting On Sidelines For Nordic LEVEL Group AB (publ.) (STO:LEVEL)

You may think that with a price-to-sales (or "P/S") ratio of 0.4x Nordic LEVEL Group AB (publ.) (STO:LEVEL) is a stock worth checking out, seeing as almost half of all the Electronic companies in Sweden have P/S ratios greater than 1.3x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Nordic LEVEL Group AB (publ.)

How Nordic LEVEL Group AB (publ.) Has Been Performing

Recent times have been advantageous for Nordic LEVEL Group AB (publ.) as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nordic LEVEL Group AB (publ.).

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Nordic LEVEL Group AB (publ.) would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 50% gain to the company's top line. The latest three year period has also seen an excellent 105% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 17% over the next year. With the industry only predicted to deliver 5.4%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Nordic LEVEL Group AB (publ.) is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

A look at Nordic LEVEL Group AB (publ.)'s revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Nordic LEVEL Group AB (publ.) you should be aware of.

If you're unsure about the strength of Nordic LEVEL Group AB (publ.)'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.