Maven Wireless Sweden AB (Publ) (STO:MAVEN) Might Not Be As Mispriced As It Looks After Plunging 27%

Maven Wireless Sweden AB (Publ) (STO:MAVEN) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 31% in that time.

Even after such a large drop in price, there still wouldn't be many who think Maven Wireless Sweden's price-to-sales (or "P/S") ratio of 1.9x is worth a mention when the median P/S in Sweden's Communications industry is similar at about 2.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for Maven Wireless Sweden

What Does Maven Wireless Sweden's P/S Mean For Shareholders?

With revenue that's retreating more than the industry's average of late, Maven Wireless Sweden has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. You'd much rather the company improve its revenue if you still believe in the business. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Maven Wireless Sweden.

Is There Some Revenue Growth Forecasted For Maven Wireless Sweden?

The only time you'd be comfortable seeing a P/S like Maven Wireless Sweden's is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.1%. Still, the latest three year period has seen an excellent 270% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the one analyst covering the company suggest revenue growth will be highly resilient over the next year growing by 9.3%. Meanwhile, the broader industry is forecast to contract by 0.3%, which would indicate the company is doing very well.

With this information, we find it odd that Maven Wireless Sweden is trading at a fairly similar P/S to the industry. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

What Does Maven Wireless Sweden's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Maven Wireless Sweden looks to be in line with the rest of the Communications industry. 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.

We note that even though Maven Wireless Sweden trades at a similar P/S as the rest of the industry, it far eclipses them in terms of forecasted revenue growth. Given the glowing revenue forecasts, we can only assume potential risks are what might be capping the P/S ratio at its current levels. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Maven Wireless Sweden that you need to be mindful of.

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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.