The S&W Seed Company (NASDAQ:SANW) share price has fared very poorly over the last month, falling by a substantial 42%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 32% in that time.
Although its price has dipped substantially, there still wouldn't be many who think S&W Seed's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in the United States' Food industry is similar at about 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
View our latest analysis for S&W Seed
NasdaqCM:SANW Price to Sales Ratio vs Industry October 29th 2023
What Does S&W Seed's Recent Performance Look Like?
Recent times haven't been great for S&W Seed as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on S&W Seed will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The P/S?
The only time you'd be comfortable seeing a P/S like S&W Seed's is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 7.6% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Turning to the outlook, the next year should generate growth of 19% as estimated by the two analysts watching the company. With the industry only predicted to deliver 2.4%, the company is positioned for a stronger revenue result.
With this in consideration, we find it intriguing that S&W Seed'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 Bottom Line On S&W Seed's P/S
S&W Seed's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Looking at S&W Seed's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
We don't want to rain on the parade too much, but we did also find 4 warning signs for S&W Seed (2 shouldn't be ignored!) that you need to be mindful of.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.