Investors Still Aren't Entirely Convinced By Nordic LEVEL Group AB (publ.)'s (STO:LEVEL) Revenues Despite 28% Price Jump

Nordic LEVEL Group AB (publ.) (STO:LEVEL) shares have continued their recent momentum with a 28% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

Although its price has surged higher, Nordic LEVEL Group AB (publ.) may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Electronic industry 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.

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

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

Nordic LEVEL Group AB (publ.) could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Nordic LEVEL Group AB (publ.) will help you uncover what's on the horizon.

How Is Nordic LEVEL Group AB (publ.)'s Revenue Growth Trending?

Nordic LEVEL Group AB (publ.)'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. Even so, admirably revenue has lifted 262% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 11% per year over the next three years. That's shaping up to be materially higher than the 8.7% per year growth forecast for the broader industry.

In light of this, it's peculiar that Nordic LEVEL Group AB (publ.)'s P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

The latest share price surge wasn't enough to lift Nordic LEVEL Group AB (publ.)'s P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Nordic LEVEL Group AB (publ.) (1 can't be ignored) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.