Investors Appear Satisfied With Maven Wireless Sweden AB (Publ)'s (STO:MAVEN) Prospects As Shares Rocket 32%

Maven Wireless Sweden AB (Publ) (STO:MAVEN) shares have had a really impressive month, gaining 32% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.5% in the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking Maven Wireless Sweden is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.3x, considering almost half the companies in Sweden's Communications industry have P/S ratios below 2.1x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Maven Wireless Sweden

What Does Maven Wireless Sweden's Recent Performance Look Like?

Recent times have been quite advantageous for Maven Wireless Sweden as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, 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.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Maven Wireless Sweden's earnings, revenue and cash flow.

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

The only time you'd be truly comfortable seeing a P/S as high as Maven Wireless Sweden's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 183% gain to the company's top line. The latest three year period has also seen an excellent 250% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

In contrast to the company, the rest of the industry is expected to decline by 2.2% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's understandable that Maven Wireless Sweden's P/S sits above the majority of other companies. Investors are willing to pay more for a stock they hope will buck the trend of the broader industry going backwards. Nonetheless, with most other businesses facing an uphill battle, staying on its current revenue path is no certainty.

What We Can Learn From Maven Wireless Sweden's P/S?

Maven Wireless Sweden shares have taken a big step in a northerly direction, but its P/S is elevated as a result. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As detailed previously, the strength of Maven Wireless Sweden's recent revenue trends over the medium-term relative to a declining industry is part of the reason why it trades at a higher P/S than its industry counterparts. Right now shareholders are comfortable with the P/S as they are quite confident revenues aren't under threat. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader industry turmoil. Otherwise, it's hard to see the share price falling strongly in the near future if its revenue performance persists.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Maven Wireless Sweden (1 is significant) 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.