Slammed 30% Oliver's Real Food Limited (ASX:OLI) Screens Well Here But There Might Be A Catch

Unfortunately for some shareholders, the Oliver's Real Food Limited (ASX:OLI) share price has dived 30% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 63% share price decline.

Following the heavy fall in price, considering around half the companies operating in Australia's Hospitality industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider Oliver's Real Food as an solid investment opportunity with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Oliver's Real Food

How Has Oliver's Real Food Performed Recently?

Revenue has risen at a steady rate over the last year for Oliver's Real Food, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. Those who are bullish on Oliver's Real Food 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 Oliver's Real Food, 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 Oliver's Real Food's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.5% last year. Revenue has also lifted 14% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 3.4% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that Oliver's Real Food is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

The southerly movements of Oliver's Real Food's shares means its P/S is now sitting at a pretty low level. 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.

The fact that Oliver's Real Food currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. medium-term

We don't want to rain on the parade too much, but we did also find 4 warning signs for Oliver's Real Food (3 are concerning!) that you need to be mindful 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.