Investors are still not entirely convinced about K33 AB's earnings despite 116% price rise. This is what Simply Wall St writes in a recent analysis.
K33 shares, listed in Sweden, have continued their recent momentum with a 116% gain in just one month. The annual gain comes to 252% after the recent rise, causing investors to wake up and pay attention.
Even after such a large price increase, K33's price-to-sales (or “P/S”) ratio of 1.1x can still look like a buy compared to the software industry in Sweden, where about half the companies have P/S ratios above 2.3x and P/S above 5x is fairly common. Still, the low P/S may be for a reason and requires closer examination to determine if it is justified.
Compared to the industry, which is only expected to deliver 18% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annual revenue results. In light of this, it is curious that K33's P/S is below the majority of other companies. It looks like most investors are not convinced that the company can sustain its recent growth rates.
Simply Wall St therefore writes: “We are very surprised to see K33 currently trading at a much lower than expected P/S, since the company's three-year growth is higher than the broader industry forecast. Seeing strong revenue with faster than industry growth, we assume that there are some significant underlying risks to the company's ability to make money, putting downward pressure on the P/S ratio. In any case, price risk appears to be very low if recent medium-term earnings trends continue, but investors seem to believe that future earnings could experience a lot of volatility.”
Investors are still not entirely convinced about K33 AB's earnings despite 116% price rise. This is what Simply Wall St writes in a recent analysis.
K33 shares, listed in Sweden, have continued their recent momentum with a 116% gain in just one month. The annual gain comes to 252% after the recent rise, causing investors to wake up and pay attention.
Even after such a large price increase, K33's price-to-sales (or “P/S”) ratio of 1.1x can still look like a buy compared to the software industry in Sweden, where about half the companies have P/S ratios above 2.3x and P/S above 5x is fairly common. Still, the low P/S may be for a reason and requires closer examination to determine if it is justified.
Compared to the industry, which is only expected to deliver 18% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annual revenue results. In light of this, it is curious that K33's P/S is below the majority of other companies. It looks like most investors are not convinced that the company can sustain its recent growth rates.
Simply Wall St therefore writes: “We are very surprised to see K33 currently trading at a much lower than expected P/S, since the company's three-year growth is higher than the broader industry forecast. Seeing strong revenue with faster than industry growth, we assume that there are some significant underlying risks to the company's ability to make money, putting downward pressure on the P/S ratio. In any case, price risk appears to be very low if recent medium-term earnings trends continue, but investors seem to believe that future earnings could experience a lot of volatility.”
