Many Still Looking Away From Stryve Foods, Inc. (NASDAQ:SNAX)
Stryve Foods, Inc.'s (NASDAQ:SNAX) price-to-sales (or "P/S") ratio of 0.2x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Food industry in the United States have P/S ratios greater than 0.8x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
View our latest analysis for Stryve Foods
How Stryve Foods Has Been Performing
For example, consider that Stryve Foods' financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on Stryve Foods will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.
Although there are no analyst estimates available for Stryve Foods, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as Stryve Foods' is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered a frustrating 36% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 19% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 2.1% over the next year, materially lower than the company's recent medium-term annualised growth rates.
In light of this, it's peculiar that Stryve Foods' P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.
The Final Word
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We're very surprised to see Stryve Foods 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 strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Before you settle on your opinion, we've discovered 4 warning signs for Stryve Foods (3 don't sit too well with us!) that you should be aware of.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
