Even With A 25% Surge, Cautious Investors Are Not Rewarding Waystream Holding AB (publ)'s (STO:WAYS) Performance Completely

Waystream Holding AB (publ) (STO:WAYS) shares have continued their recent momentum with a 25% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

Although its price has surged higher, it's still not a stretch to say that Waystream Holding's price-to-sales (or "P/S") ratio of 1.7x right now seems quite "middle-of-the-road" compared to the Communications industry in Sweden, where the median P/S ratio is around 2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Check out our latest analysis for Waystream Holding

How Has Waystream Holding Performed Recently?

Recent times have been pleasing for Waystream Holding as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. Those who are bullish on Waystream Holding will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

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

Do Revenue Forecasts Match The P/S Ratio?

Waystream Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Revenue has also lifted 25% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 14% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 2.6%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Waystream Holding's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Waystream Holding's P/S Mean For Investors?

Waystream Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Despite enticing revenue growth figures that outpace the industry, Waystream Holding's P/S isn't quite what we'd expect. 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.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Waystream Holding that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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

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.