Fewer Investors Than Expected Jumping On SunOpta Inc. (NASDAQ:STKL)
There wouldn't be many who think SunOpta Inc.'s (NASDAQ:STKL) price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S for the Food industry in the United States is very similar. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
Check out our latest analysis for SunOpta
How Has SunOpta Performed Recently?
With revenue growth that's inferior to most other companies of late, SunOpta has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on SunOpta.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like SunOpta's is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a decent 8.7% gain to the company's revenues. Pleasingly, revenue has also lifted 47% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the six analysts following the company. That's shaping up to be materially higher than the 4.9% growth forecast for the broader industry.
With this in consideration, we find it intriguing that SunOpta's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
What We Can Learn From SunOpta's P/S?
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've established that SunOpta currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
You should always think about risks. Case in point, we've spotted 2 warning signs for SunOpta you should be aware of.
If these risks are making you reconsider your opinion on SunOpta, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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