The Price Is Right For Tobii AB (publ) (STO:TOBII) Even After Diving 26%

Tobii AB (publ) (STO:TOBII) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 77% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Tobii's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Tech industry in Sweden is also close to 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Tobii

How Tobii Has Been Performing

With revenue growth that's inferior to most other companies of late, Tobii has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think Tobii's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Tobii?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Tobii's to be considered reasonable.

Retrospectively, the last year delivered a decent 8.2% gain to the company's revenues. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 8.5% as estimated by the lone analyst watching the company. That's shaping up to be similar to the 8.1% growth forecast for the broader industry.

In light of this, it's understandable that Tobii's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Tobii's P/S?

Tobii'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.

Our look at Tobii's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Tobii (2 don't sit too well with us!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.