Benign Growth For Thunderful Group AB (STO:THUNDR) Underpins Stock's 29% Plummet

Thunderful Group AB (STO:THUNDR) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 71% loss during that time.

Since its price has dipped substantially, Thunderful Group may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.1x, since almost half of all companies in the Electronic industry in Sweden have P/S ratios greater than 2.3x and even P/S higher than 6x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 2 warning signs investors should be aware of before investing in Thunderful Group. Read for free now.

Check out our latest analysis for Thunderful Group

What Does Thunderful Group's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Thunderful Group's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

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

Thunderful Group's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much 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 90%. This means it has also seen a slide in revenue over the longer-term as revenue is down 91% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 3.5% per annum as estimated by the one analyst watching the company. That's shaping up to be materially lower than the 8.0% per year growth forecast for the broader industry.

In light of this, it's understandable that Thunderful Group's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Thunderful Group's P/S Mean For Investors?

Thunderful Group's P/S looks about as weak as its stock price lately. 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've established that Thunderful Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Thunderful Group (1 is a bit unpleasant!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.