EZFill Holdings Inc. (NASDAQ:EZFL) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness.    Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.  

Although its price has surged higher, EZFill Holdings may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Oil and Gas industry in the United States have P/S ratios greater than 1.8x and even P/S higher than 4x are not unusual.   However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.  

NasdaqCM:EZFL Price to Sales Ratio vs Industry March 3rd 2024

What Does EZFill Holdings' P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, EZFill Holdings has been doing very well.   Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed.  If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.    

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on EZFill Holdings will help you shine a light on its historical performance.  

What Are Revenue Growth Metrics Telling Us About The Low P/S?  

EZFill Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.  

Retrospectively, the last year delivered an exceptional 84% 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.  

Comparing that to the industry, which is only predicted to deliver 5.1% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that EZFill Holdings' P/S sits below the majority of other companies.  Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.  

The Final Word

The latest share price surge wasn't enough to lift EZFill Holdings' P/S close to the industry median.      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.

We're very surprised to see EZFill Holdings currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast.  When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio.  At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.    

You need to take note of risks, for example - EZFill Holdings has 4 warning signs  (and 2 which are concerning) we think you should know about.  

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.