After Leaping 26% Smart Eye AB (publ) (STO:SEYE) Shares Are Not Flying Under The Radar

Smart Eye AB (publ) (STO:SEYE) shares have had a really impressive month, gaining 26% 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 6.4% in the last twelve months.

After such a large jump in price, when almost half of the companies in Sweden's Electronic industry have price-to-sales ratios (or "P/S") below 1.5x, you may consider Smart Eye as a stock not worth researching with its 7.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Smart Eye

How Smart Eye Has Been Performing

Smart Eye certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Smart Eye's Revenue Growth Trending?

Smart Eye's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 28% last year. The strong recent performance means it was also able to grow revenue by 272% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 59% per annum as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.1% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Smart Eye's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Smart Eye's P/S

Shares in Smart Eye have seen a strong upwards swing lately, which has really helped boost its P/S figure. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Smart Eye shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 4 warning signs for Smart Eye you should be aware of, and 1 of them shouldn't be ignored.

If you're unsure about the strength of Smart Eye'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.