A Piece Of The Puzzle Missing From Oatly Group AB's (NASDAQ:OTLY) Share Price

It's not a stretch to say that Oatly Group AB's (NASDAQ:OTLY) price-to-sales (or "P/S") ratio of 0.9x seems quite "middle-of-the-road" for Food companies in the United States, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Oatly Group

How Oatly Group Has Been Performing

Oatly Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Oatly Group'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?

In order to justify its P/S ratio, Oatly Group would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.5% last year. The latest three year period has also seen an excellent 86% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 8.0% per year over the next three years. That's shaping up to be materially higher than the 3.0% per year growth forecast for the broader industry.

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

The Key Takeaway

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.

Looking at Oatly Group's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 2 warning signs we've spotted with Oatly Group.

If these risks are making you reconsider your opinion on Oatly Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.