Take Care Before Jumping Onto Maven Wireless Sweden AB (Publ) (STO:MAVEN) Even Though It's 27% Cheaper

Maven Wireless Sweden AB (Publ) (STO:MAVEN) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. Indeed, the recent drop has reduced its annual gain to a relatively sedate 5.2% over the last twelve months.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Maven Wireless Sweden's P/S ratio of 2.7x, since the median price-to-sales (or "P/S") ratio for the Communications industry in Sweden is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Maven Wireless Sweden

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

Maven Wireless Sweden certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. Those who are bullish on Maven Wireless Sweden will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on Maven Wireless Sweden will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Maven Wireless Sweden?

In order to justify its P/S ratio, Maven Wireless Sweden would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 83% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 18% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 2.7% growth forecast for the broader industry.

With this information, we find it interesting that Maven Wireless Sweden is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Maven Wireless Sweden's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Looking at Maven Wireless Sweden's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware Maven Wireless Sweden is showing 2 warning signs in our investment analysis, and 1 of those is concerning.

If you're unsure about the strength of Maven Wireless Sweden'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com