Why Investors Shouldn't Be Surprised By Cadeler A/S' (OB:CADLR) P/S

When you see that almost half of the companies in the Construction industry in Norway have price-to-sales ratios (or "P/S") below 0.7x, Cadeler A/S (OB:CADLR) looks to be giving off strong sell signals with its 2.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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How Has Cadeler Performed Recently?

Cadeler certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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Is There Enough Revenue Growth Forecasted For Cadeler?

The only time you'd be truly comfortable seeing a P/S as steep as Cadeler's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 199% 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.

Turning to the outlook, the next three years should generate growth of 23% per year as estimated by the six analysts watching the company. That's shaping up to be materially higher than the 5.2% each year growth forecast for the broader industry.

With this information, we can see why Cadeler is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

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.

Our look into Cadeler shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Cadeler (1 is potentially serious!) that you should be aware of.

If these risks are making you reconsider your opinion on Cadeler, 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.