To the annoyance of some shareholders, Zevia PBC (NYSE:ZVIA) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.
Since its price has dipped substantially, Zevia PBC may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Beverage industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 6x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
NYSE:ZVIA Price to Sales Ratio vs Industry May 9th 2024
How Zevia PBC Has Been Performing
While the industry has experienced revenue growth lately, Zevia PBC's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zevia PBC.
How Is Zevia PBC's Revenue Growth Trending?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like Zevia PBC's to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.9%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 37% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Turning to the outlook, the next year should generate growth of 10% as estimated by the seven analysts watching the company. With the industry only predicted to deliver 3.9%, the company is positioned for a stronger revenue result.
In light of this, it's peculiar that Zevia PBC's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Bottom Line On Zevia PBC's P/S
Shares in Zevia PBC have plummeted and its P/S has followed suit. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
To us, it seems Zevia PBC currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
You should always think about risks. Case in point, we've spotted 5 warning signs for Zevia PBC you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.