Maven Wireless Sweden AB (Publ)'s (STO:MAVEN) 39% Dip In Price Shows Sentiment Is Matching Revenues

Maven Wireless Sweden AB (Publ) (STO:MAVEN) shares have had a horrible month, losing 39% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

After such a large drop in price, when close to half the companies operating in Sweden's Communications industry have price-to-sales ratios (or "P/S") above 2.2x, you may consider Maven Wireless Sweden as an enticing stock to check out with its 1.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. You'd much rather the company improve its revenue performance if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Do Revenue Forecasts Match The Low P/S Ratio?

Maven Wireless Sweden'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.

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 8.3%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 194% in total over the last three years. 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.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.5% as estimated by the sole analyst watching the company. That's not great when the rest of the industry is expected to grow by 0.2%.

With this information, we are not surprised that Maven Wireless Sweden is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Maven Wireless Sweden's P/S has taken a dip along with its share price. 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.

As we suspected, our examination of Maven Wireless Sweden's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Maven Wireless Sweden (at least 1 which is significant), and understanding them should be part of your investment process.

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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.