Unibap AB (publ) (STO:UNIBAP) Looks Just Right With A 26% Price Jump

Despite an already strong run, Unibap AB (publ) (STO:UNIBAP) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 131% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given close to half the companies operating in Sweden's Electronic industry have price-to-sales ratios (or "P/S") below 1.5x, you may consider Unibap as a stock to potentially avoid with its 2.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Unibap

What Does Unibap's Recent Performance Look Like?

Unibap certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for Unibap, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Unibap's Revenue Growth Trending?

In order to justify its P/S ratio, Unibap would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 40% 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.

Comparing that to the industry, which is only predicted to deliver 8.5% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Unibap is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Key Takeaway

Unibap shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Unibap revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

You should always think about risks. Case in point, we've spotted 3 warning signs for Unibap you should be aware of, and 2 of them don't sit too well with us.

If you're unsure about the strength of Unibap'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.